Yanks join political pygmy parade
by Peter Switzer
The experts said it wouldn’t happen and I didn’t believe them, so on cue the super ‘Dopes’ committee of the US Congress look set to fail to agree to deficit and debt reductions leading Wall Street to sell off.
Of course, the dopes in Europe have contributed to the 248-point slide of the Dow Jones index to 11,547.31, which is a 2.11 per cent drop, but the Yanks deciding upon debt matters could have made a difference but they just couldn’t do it.
The job the so-called super committee was supposed to achieve was slicing $1.2 trillion off the country’s $15 trillion national debt.
The deadline for voting on this measure is November 23 – midnight, in fact – and so something positive had to materialise but it hasn’t.
Meanwhile fears of a bank credit freeze are increasing as the political paralysis seems to have no answer to the spread of contagion from Greece to Italy to Spain, with France not free of speculation that it too could be infected.
One positive I liked was the oil price which has been flirting with US$100 a barrel but it has dropped to US$97.17 and even gold has been clobbered around US$50 an ounce.
In the meantime, the failure of the super committee to agree has increased rumours that another debt rating downgrade could await America and that does nothing to build up investor confidence.
Mind you, the US failure is nothing compared to Europe, as automatic spending cut measures are installed to kick in by 2013, but the market is crying out for leadership to bolster confidence but the political pygmies in the US and Europe just cannot step up.
This could result in a 10 per cent dive in the US stock market if the doomsday merchants are right but I doubt the reaction will be that bad. That said, if Europe disappoints further it could well happen!
Spain is the new flashpoint despite a new conservative government achieving an absolute majority.
“This crisis is hitting the core of the eurozone. We should have no illusions about this,” European Economic and Monetary Affairs Commissioner Olli Rehn told Reuters.
Anyone hoping for a Christmas rally better pray for a big European Central Bank play soon, because that could turn around market sentiment. If it doesn’t happen and markets slump then the only positive for Aussies will be a December rate cut and it could be bigger than 0.25 per cent! I hope that doesn’t have to happen.
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Published on: Tuesday, November 22, 2011
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