How market panic can feed back to the world economy

FINANCIAL MARKETS have not endured a day as brutal as March 9th since the global financial crisis of 2007-09. Stockmarkets were a sea of red ink. The S&P 500 index fell by 7.6%. The FTSE 100—laden with oil firms, such as Shell and BP, and other natural-resource companies—suffered a similar drop. Investors rushed for the safety of government bonds. The yield on ten-year American Treasuries dipped below 0.5% for the first time ever. Investors sought other havens, such as the yen.

But why the panic? Cheaper oil ought to be a balm to the world economy. The oil-price spikes of the 1970s and early 1990s led to recessions because they transferred income from oil-consuming countries in the West to oil-producing countries in the Middle East. The consumers were forced to cut spending, but the producers saved much of their windfall. The net effect was to squash aggregate demand. So a sharp drop should act as a stimulus.

Russia—the tactical target of Saudi Arabia’s price war—is different. Since 2014 it has run orderly monetary and fiscal policies. It has been a net provider of credit to the world, not a net borrower. And it has saved a lot of its surplus oil revenue for a rainy day, by basing its budget on an oil price of $40 a barrel. Middle Eastern and African producers have not been as disciplined. Saudi Arabia itself needs $80 a barrel to balance the books.

Every single time we have a Republican President they crash the economy. Thankfully, Trump managed to do it in his first term (he has a knack for quickly squandering inheritances), so we won’t have to endure a second term.

Markets are anything but rational; they have no expectations other than those of one trader other traders, all interacting to create market indices. On a day like March 9, look for who made the killing. Take those out, and what you have is a bunch of morons on the floor.

On the other hand it is the best time to invest money in the stock market. Prices in the stocks are very low and the probability of increasing the index values in the following quarters are very high.

Where are they putting their money? Mars?

😂 Не нужно ложных выводов США - давно банкрот! Рухнула выдуманная стабильность нефтенных фьючерсов которые на самом деле на бумаге на 75% более реальных продаж нефти - чем и колдовали США выдавая это за стабильность и правило торгов теперь вы можете лишь только - ими подтерется!

It's not a panic. It's a logical response to economies grinding to a halt due to pandemic. I thought The Economist believed in the Invisible Hand of the markets.

alllibertynews ^link to new blog on election season^ Presidential Race 2020 Coverage: DDU Founder proclaims 'Trump is Bound to Win'

Aaw poor dum dumb!

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