Inadequate Bureaucratic Coordination of the Global Rate Cuts
The coordinated global rate cuts finally happened, 24 hours too late after global markets crashed once more, most notably the Japanese Nikkei down over 9% yesterday. The Fed's 50bp cut was tepid and traders know it; the Fed had already been pumping money into the system to imply that rate.
Why the subdued, late reactions? Global coordination requires bureacratic buy-in. Bernanke can't go for the quick fix (say, 100bp + cut) without consensus. The European Central Banks have always been reluctant to move quickly and lower rates, and their compasses are off while being dragged into an extraordinary crisis they once thought was America's problem:
The markets will continue its drop until this bureaucracy gets it right to restore global investor confidence. Dow now down 200 @ 9:20am PDT
Wouldn't surprise me if more rate cuts follow in quick succession as long as markets keep tanking. The damage to investor confidence has been done. Although I would expect the rebound to be sudden and swift when buyers do eventually return, it will be extremely volatile as freaked out stock-ascetic investors continue to sell into rallies.
Three short weeks ago, Paulson and Bernanke were right to sound the alarm to move quickly with the then surprise bailout plan. They saw how close the markets were to short circuiting, and now it's a foregone conclusion.
Why the subdued, late reactions? Global coordination requires bureacratic buy-in. Bernanke can't go for the quick fix (say, 100bp + cut) without consensus. The European Central Banks have always been reluctant to move quickly and lower rates, and their compasses are off while being dragged into an extraordinary crisis they once thought was America's problem:
"I hope this is enough but I wouldn't be 100-percent sure," said Rainer Singer of Erste Bank in Vienna. "In a normal environment, this should
have been sufficient."
(that last sentence is clueless)
(that last sentence is clueless)
The markets will continue its drop until this bureaucracy gets it right to restore global investor confidence. Dow now down 200 @ 9:20am PDT
Wouldn't surprise me if more rate cuts follow in quick succession as long as markets keep tanking. The damage to investor confidence has been done. Although I would expect the rebound to be sudden and swift when buyers do eventually return, it will be extremely volatile as freaked out stock-ascetic investors continue to sell into rallies.
Three short weeks ago, Paulson and Bernanke were right to sound the alarm to move quickly with the then surprise bailout plan. They saw how close the markets were to short circuiting, and now it's a foregone conclusion.
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