KEY POINTS:
Fear and loathing now have an inexorable grip on the throat of the entire global financial market.
The fear has been with us for nearly three weeks but was reined in. It remained manageable while the carrot of the US Government's $1 trillion bailout was dangling within reach.
An end was in sight. Not the end of the credit crunch _ because that still had a long way to flow through the real economies of the world, which ever way the bailout went. But the end of the panic and the crisis situation was at hand. It was time to start thinking about the way forward.
No more.
In move that has stunned everyone and left even hardened optimists staring at the floor, that hope was wiped away this morning as the US Congress said no to the only plan on the table.
How utterly unheroic.
So the loathing is for those 23 partisan US politicians who have let this beast back out of its cage. They will claim they are looking after the little guy, standing up against the greed and wealth of Wall Street. But to what end? The damage has been done. And frankly it was the US Government that has allowed it to be done under its watch.
The moral posturing is meaningless. This crisis called for pragmatism and bravery.
As markets fall it is the retirement funds of their constituents that suffer. It is the interest rates of their constituents that will rise. It is the banks where their constituents keep their money that will fail.
They have surely only delayed the inevitable. There will be bailout. There must be. Americans need it more than anyone.
But when? How many more days must they bicker?
And what? How many more concessions will there be to water down the effectiveness of what can be done?
In the mean time what carnage will the fear wreck through the world.
The markets will find a floor. It won't be pretty but unlike crashes of the past the listed companies themselves aren't the issue here.
Those that don't have credit problems are still in good shape. Recession itself is yet to come to the US and thus far has been mild where it has struck in other parts of the world.
Most of the NZX-50 stocks are still quality propositions....or will be as soon confidence returns.
More serious is the damage to credit markets. They were all but frozen last week as banks had stopped lending to each other.
There have been three big collapses already in the last five days. Washington Mutual collapsed on Friday and was sold to JP Morgan _ the biggest banking failure in US history.
Fortis, the largest Belgian financial-services firm, got a $23 billion rescue from Belgium, the Netherlands and Luxembourg. And the Brits had to nationalise Bradford & Bingley _ which had more than $100 billion of mortgages. That was while the bailout was on track.
What happens now?
All bets are off. Locally we are still buffered by our reliance on the Australian banks which are among the healthiest in the world right now. But today their shares are in free fall.
If the banking meltdown spreads from Europe to Asia then the situation could get a lot more serious for Australasia.
There will be a reaction from central banks around the world. More cash will be fed in to the system but ultimately that is a treatment for the symptoms not a cure for the cause.
The best hope we have for an orderly resolution to the crisis remains with those stubborn US politicians. Let's hope they can find the strength to solve this thing. And soon.
Photo/ AP
