The fire sweeping international stock markets brings the danger of a massive recession closer, amid frantic efforts by governments and central banks in Europe and America to ease the crisis. But, argues Martine Orange, the world of finance is starring into an abyss, only too aware that it is ‘game over' on three decades of easy money, with the public purse now empty and incapable of mounting a rescue as it did in 2008.
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The financial collapse that has been threatening for days, and which the financial and political authorities tried to counter last weekend, appears ever closer, almost by the hour. While stock markets in Europe and America rallied in late trading Tuesday, it was against dramatic, and in some cases historic, losses. The course over the coming days is uncertain.
Everything has been swept away in the panic of the markets. The automated sales system has accentuated the rout, sending out orders for liquidation of stocks within nanoseconds. Nothing can resist the financial hurricane.
The markets have finally realised that a recession, the feared double dip, is just around the corner. However, there were numerous indicators of this over the past few weeks and which should have alerted them earlier. Employment figures, business activity, consumer spending, industrial and consumer confidence - all of these were down.
The surprising reappraisal of the rate of US economic growth for the first quarter, down to 0.4% from 1.3%, in itself summed up the situation. Never have US economic statistics previously seen a correction of such proportion. It illustrated the artificial and manufactured nature of the rebound being reported over recent months.
Barack Obama's speech on Monday night did away with any last hopes of a revival through public spending. The US, after so many others, is locked into a programme of public spending cuts. America and Europe, following the demands of the financial markets, have made austerity their unique political and economic policy. The recession that is now looming could become another Great Depression. It is the fear of this that the markets are now registering.
The great depression among financiers is above all a personal one. In the recession of 2008, they were collectively saved by public bailouts. But today that get-out is gone. Governments now no longer have the means to help private finance out of the hole of each recession, as they have done over the past 30 years. Even the US Federal Reserve, which has handed out masses of cash over so many years, can no longer do so. Gone is the age of monetary policy known as quantitative easing, a period of freely accessible money at next to no interest rate.
Of course, the financial world knows all this, and in reality expects little, if nothing, from the Federal Reserve open markets committee (FOMC) meeting beginning Tuesday. The US central bank has few weapons at its disposal, and simply hasn't the means to satisfy Wall Street as it so often has in the past.
Thus it is that the world of private finance can no longer put off payment day, or rely on others to cover the shortfalls. It stands alone before its problems and turpitudes. The curtain is coming down on a three-decade period of easy money, with the exhaustion of all those others who played a part in it. To coin a phrase, it's ‘game over'.
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