Asia Times: Bernanke running out of ammo

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Bernanke running out of ammo
By Julian Delasantellis


A well-worn bit of wisdom from rural America advises one that it is pointless to "close the barn door after the cows have escaped". By participating in yesterday's global round of short-term interest rate cuts, US Federal Reserve chairman Ben Bernanke cannot be said to have been guilty of this offense. Instead, what he has done is to close the barn door after the cows have escaped, been captured down the road by cattle rustlers, then sold, slaughtered and ground up into dog food chunks.

For the 10th time since August, 2007, the Federal Reserve has engineered an interest rate cut in order to counter the spreading effects of the now global financial and credit crisis. With twin 50 basis point cuts in both the Discount Rate, to 1.75%, and the Federal Funds Target Rate, to 1.5%, the Fed has now just about emptied its magazine of possible interest rate cuts.

Yesterday's cuts, coordinated across the globe with the Bank of England, the European Central Bank, the Swiss Central Bank, and the Riksbank of Sweden, with the Bank of China participating independently with cuts of its own, are the latest policy initiatives employed by desperate and besieged world economic officials to contain a truly awesome fire-breathing ogre that goes by the name of deleveraging, a monster that seems to get worse, and more importantly, laugh away all attempts to contain it, with every passing day.

It's only natural to characterize the world financial crisis by what's happening in the world's stockmarkets. Wednesday was one of those days, when from the moment the sun burst across the horizon in the Western Pacific until it waned in New York about 21 hours later, there was nothing but pain and sorrow for those learning the painful lesson that yet another mortal deity constructed of man, in this case the religion of the God of Money, had failed.

Stocks opened in Tokyo, proceeded to fall by the greatest amount since the crash of 1987 and stock trading was halted in Indonesia (as it was in Russia, Ukraine, and Romania) after its benchmark stock index, the Jakarta Composite, dropped 10% early in the trading day. Most major European indices, even after the news of the coordinated rate cuts were announced, fell by between 4% and 7%.

In the United States, the Dow Jones Industrial Average, after making a feeble attempt at a rally in the first hours of trading, was back selling off in the afternoon, closing down a further 189 points. Just since mid-day last Friday, when Treasury Secretary "Hank" Paulson's bailout plan passed the US House of Representatives, the Dow has lost 1,500 points, 14%, of its value; just since September 1, it's off 2,500 points, or just over 21% of its value.

This week marks the first anniversary of the all time high of the Dow, at just under 14,300. Since then, the market has lost 35% of its value, over 5,000 points, or almost US$9 trillion of investor wealth. For those who like their karma extra sweet, it is also the first anniversary of the premiere of the Fox Business Network, specifically established by News Corp chairman Rupert Murdoch and his consigliore Roger Ailes, to tell the story of American business that they believed the rest of the financial media were not telling, namely, that all was right and that the future looked blindingly bright, for the unregulated private sector that was at the core of American capitalism. ......(more)

The complete piece is at: http://www.atimes.com/atimes/Global_Economy/JJ10Dj01.html