Black Monday

One of my colleagues came into the office this morning and we started talking about the mess the US financial system is in right now. We laughed about the foot dragging and politicking that is taking place as it looks like the Republicans are doing everything the can to make McCain’s campaign suspension look like the prudent thing to have done. Still it is Friday today. The markets are closed for the next two days and will reopen on Monday. Monday after having had two days to digest the past week of news, the current state of the financial system, and the lack of progress on a bailout plan, and the fact that the DOW is at about the same level as during the summer when the worst of the credit crunch seemed to be behind us. With WaMu going under today, there must still be more banks out there on the edge. At least JP Morgan is making out like a bandit.

If the bail out plan is worked out before the weekend is over there is some hope for the markets. If there is nothing concrete by then we are looking at the Black Monday of our generation. Even if the plan does go ahead, no one knows it will work. No one knows what the short run implications will be. The bailout going ahead will likely only maintain the market volatility we see now. This still seems preferable to collapse, but simply having a deal doesn't mean we are out of the woods yet.