Crucial waiting game for US markets
Updated
Across the Atlantic, the lack of any detailed plans to emerge from the weekend meetings of the G7 and G20 groups of nations has traders bracing themselves for another brutal day on Wall Street.
Presenter: Michael Rowland
Speakers: Paul Krugman, Princeton University Economics Professor; Art Cashin the director of floor trading at UBS Securities in New York; Doreen Mogavero, trading floor veterans; Robert Reich, a former US Labor Secretary
MICHAEL ROWLAND: The weekend round of crisis meetings in Washington has produced plenty of strongly worded statements about the urgent need to fix the global financial system.
The finance ministers and central bankers gathered here all agree decisive action needs to be taken to prevent more bank failures and to kick-start those stalled credit markets.
But there've been precious few details on just how the bold action plans would actually work.
Neither the G7 nor the G20 have agreed, for instance, to guarantee lending between banks.
Nor has there been any collective decision to take ownership stakes in banks, like many individual countries are now doing.
It's not the result the markets wanted.
ART CASHIN: I think it would be a major problem if they didn't come out with some apparent co-ordinated plan. That has been the problem in this crisis all the way through. First they addressed things on an ad hoc basis then when they tried to co-ordinate things, they were a little bit behind the time curve.
MICHAEL ROWLAND: Art Cashin the director of floor trading at UBS Securities in New York fears there'll be another bloodbath on Wall Street as a result of the inaction.
ART CASHIN: You've got to remember that the stock market is merely the sideshow in this circus. It is the financial system that's there. To use a different metaphor, we are just the thermometer. It is the patient is the banking system that has got to get put back together and it has got to get put back together fast.
MICHAEL ROWLAND: The Dow Jones futures are already down by nearly 230 points, or nearly three per cent.
Even trading floor veterans like Doreen Mogavero aren't willing to bet on just how bad the carnage could be.
DOREEN MOGAVERO: This is not a market to make predictions in. It is very erratic. I think I am going to leave that till Monday morning and let you see what happens on your own.
MICHAEL ROWLAND: Princeton University Economics Professor and New York Times columnist Paul Krugman says finance ministers have let the world down.
PAUL KRUGMAN: This is really bad. I mean if something doesn't come out by late today, you know, we don't know but it is very scary and I have to say it has been really disappointing. The communiqué the G7, the big economic powers, released a communiqué on Friday which was boilerplate.
It was not an actual plan. It was, in fact if you are used to reading communiqués which alas I am, it had all the signs of basic disagreements papered over.
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