Gold shines in the gloom
A popular talking point on Wall Street at the moment, says the FT, is whether the “current squeeze on credit markets will be long and shallow, or short and deep”. It is an optimistic way of putting the question: the odds are it will be a nasty combination of the two options, ie, long and deep. The stockmarket knows this already.
Markets in Europe, Japan, China and the US (if measured in euros) are already technically in bear markets – they’ve fallen 20% plus from their peaks.
The Federal Reserve, whether it will admit it explicitly or not, knows it too. Why else would it be pumping another $200bn of cheap money into the banking system in exchange for collateral in the form of mortgage-backed securities?
And, of course, all the other central banks around the world know it. That’s why they’ve all jumped to co-operate with the Fed’s efforts – and why they’ll all be rather disappointed to see that these aren’t working very well.
Read the full editor’s letter here: Gold shines in the gloom