Market Hits Record Lows, Are We Doing Too Much?

The US Stock Market plummeted to record breaking lows Thursday despite increasingly extraordinary measures by the government. It seems that nothing will bring confidence back to the investor. Meanwhile, a lack of financial trust between banks and companies continues to tighten the credit knot that is strangling the markets.

In an increasingly global and complex economy the effects are no longer contained to a single market. Asian markets continued the trend losing 7% during the North American evening.

Dow dives below 8600, Asian Markets Follow

Following the news of a coordinate rate cut of 0.5 percent by the world's central banks, Wall Street started the day on an upswing.

However, very quickly investors began to price in a deeper than expected recession, both in equity and debt markets. Taking money off the table in both the stock market and the bond market simultaneous triggered another historically unique scenario.

A compendium of news seemed to send investors into an aggressive retreat.

US automakers like GM reported even more challenges to an already battered industry, indicating the increased lack of auto financing is further depressing their weaken auto sales. Meanwhile, Moody's Investor Services, questioned the debt of the two remaining Wall Street investment firms: Goldman Sachs and Morgan Stanley. Even the individual investors began reacting as several mutual funds reported aggressive runs on their portfolios as individuals pulled their money into cash reserves.

Oil, once the harbor of inflationary worries, dumped to $83 a barrel on speculation that a global recession is on the horizon.

Worldwide Coordinated Intervention

It is precisely this fear of global contagion that pushed the major central banks of North America, Europe, and now Asia to coordinate a deep cut to benchmark rates. Statements released by these respective central banks all voiced concerns over the intertwined economic effects.

Market trends are now following the sun in a true global economic trend that is trading in panic 24 hours a day, 7 days a week. The effect is only exacerbated by simultaneous 24/7 news coverage on television and the Internet.

Central banks and governments around the world are in close counsel and consultation to prove increasingly coordinated solutions.

Are There Too Many Artificial Inputs?

This of course begs the question, after numerous extraordinary measures--are we doing too much?

The rapid and constant government intervention in banking systems and now private enterprise is certain to violate the principles of Adam Smith and even overstep the limits of John Maynard Keynes. Although there has been desperate calls for help, the inputs have been numerous and only spark fleeting confidence, followed by deeper concerns.

Quite possibly the number and frequency of inputs are simply making the problem more complex and resultant harder to solve.

President Bush Attempts to Calm

Just after US market are schedule to open, President Bush will once again attempt to inject psychological calm and assurance into the market.

His statements are likely to include continued assurances that the government is willing to do whatever is necessary to stabilize the markets and protect individual savings. As a part of this assurance he is expected to announce plans to insure all bank deposits, not merely the $250,000 (recently raised from $100,000) FDIC insurance. As well as, formalize discussions of directly injecting capital into banks similar to actions taken earlier in the week by the UK.

G-20 Will Try to Sort Out Crisis

Demonstrating the level of concern and attention given this global economic strain, the G-20 (an economic council of 20 industrial nations) will come together to engage the crisis in Washington DC today.