Friday, October 10, 2008

The End of "The End"

This day marks the end of this current crisis. We might trade lower from here, or even sideways for the the short term. However, at some point in the next 6 months we will rally much higher.

The stage is set for a lot of unwinding and reshuffling of banks balance sheets. funds will fail and strong ones will consolidate. Just like after a forest fire, young saplings will take the place of large trees felled by the firestorm. All of this will happen in the market, but it will take time.

In the meantime the governments of the world have proven their resolve to act in unison to alleviate monetary pressure. There may be a meeting of the G8 (or G21) soon. Multilateral action will avert any currency crises that could arise from huge US government intervention in debt and equity markets.

Such willingness to rate cut out of trouble may set the stage for further longer term inflation, as the contemporary wave of inflation (that started in 1897 ) looks set to continue for at least a few more years hence.

As commercial paper rates come back into line with treasuries, investment firms will be able to conduct their primary business of financing and arranging transactions and the whole world economy can start anew the great ponzi scheme of growth that we currently rely on.

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