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Sunday, March 16, 2008

Will tomorrow be The St. Patrick's Day Massacre? Economy teetering on brink of disaster

Bear Sterns got bought out by J.P. Morgan Chase in an 11th-hour deal tonight, just in time to beat the opening of the Asian markets. The deal involves J.P. Morgan Chase buying the Bear Stearns stock for two bucks a share. Lots of people have lost lots of money. This came after the U.S. government agreed to bail out Bear Stearns this past Friday: essentially printing up money that isn't there to provide some short-relief.

Which means that in the long run, lots more people are going to lose lots more money because of inevitable inflation.

And depending on who you listen to, there are anywhere between three and seven or eight other major financial institutions that are also flirting perilously close to going under. Can the government and the Federal Reserve rescue them, too?

Two people that I've known for a long time have also told me that there is trouble brewing with derivatives. I'll take their word for it, even though I still have no idea what the hell "derivatives" are. Ever since I first heard about them a dozen or so years ago, I've thought they sounded too much like a Ponzi scheme. Why can't financial transactions be made using real money for real products, instead of imaginary money for imaginary products? Anyhoo, my friends tell me that if derivatives go bad, it's gonna hurt plenty.

Meanwhile, the Asian markets which are already open for Monday business are dropping like a rock: Nikkei is down over 4%. And it already ain't looking good for the Dow tomorrow either.

St. Patrick's Day tomorrow and the rest of the week might be a time to keep an eye on the economy. I'd suggest paying close attention to any news coming out of the bigger banks, especially. If even one of them winds up going down like Bear Stearns, this country will likely be in a heap o' trouble.


Anonymous said...

So much for disaster. Down up 300 now.

Chris Knight said...

It was up briefly last week too, before plummeting again and staying there for a few days. And Bernanke cut the interest rates again today: not something that's normally done in better circumstance.