US fed rate drop an embarrasing reactive blunder?
In what could only be described as an outrageous series of events, a single institutional broker’s actions last Monday and Tuesday may have triggered an entire world market collapse. Société Générale rushed to unload around $75 billion of bad trades on European stockmarkets placed by a rogue trader, Jérôme Kerviel. These offloads may have contributed to last week’s severe decline in European and Asian markets around the world, a day before the US markets pointed to absolute capitulation. And then, the US fed drops interest rates 3 quarter percentage points. Could Bernanke’s completely reactive decision to drop the rate with such force, and with the sole purpose of saving the markets, prove to be one of the biggest economic blunders of 2008 so far?
Read the full article at the New York Times.
No doubt there are real and serious aspects that are causing jitters in markets worldwide - the US credit crisis culminating in what some economists believe to be a US recession, but imagine if this most shocking of market declines last week was triggered by a single traders actions!
One thing for sure is that there will be some interesting days ahead…
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