"For the first time in nearly a year, financial markets have reawakened to fear.
What plunged the world into the maelstrom nearly two years ago was the freezing of credit markets; equities plunged only in response to what was happening in global bond and money markets. Greece and the troubled state of European banks raised those fears yet again, not for the general public just yet but in the small world of finance that serves as conduit for all global economic transactions. Now we can add to that the divide between financial markets and real world economies. While the U.S. remains deeply troubled and its banks wary of lending, overall economic activity is immense and expanding.
Global financial markets are having to adjust to the ever-presence of catastrophic, technology-enhanced meltdowns much as states had to adjust to the nuclear age after World War II. Distrust of the financial system has meant that some of that liquidity has been kept out of the financial system, out of stocks and out of bonds. So while panic can devastate markets, the money on the sidelines acts as a buffer, though that's small comfort if you're deeply invested in equities when the plunge occurs.
The past weeks are certainly a reminder that the global financial system remains highly concentrated and overly susceptible to fear. But they are also a useful reminder that what happens in financial markets is not synonymous with what happens in real world economies."
What plunged the world into the maelstrom nearly two years ago was the freezing of credit markets; equities plunged only in response to what was happening in global bond and money markets. Greece and the troubled state of European banks raised those fears yet again, not for the general public just yet but in the small world of finance that serves as conduit for all global economic transactions. Now we can add to that the divide between financial markets and real world economies. While the U.S. remains deeply troubled and its banks wary of lending, overall economic activity is immense and expanding.
Global financial markets are having to adjust to the ever-presence of catastrophic, technology-enhanced meltdowns much as states had to adjust to the nuclear age after World War II. Distrust of the financial system has meant that some of that liquidity has been kept out of the financial system, out of stocks and out of bonds. So while panic can devastate markets, the money on the sidelines acts as a buffer, though that's small comfort if you're deeply invested in equities when the plunge occurs.
The past weeks are certainly a reminder that the global financial system remains highly concentrated and overly susceptible to fear. But they are also a useful reminder that what happens in financial markets is not synonymous with what happens in real world economies."
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