Global Economic Trauma
October 27, 2008
As share prices continue to fall, European markets have hit a five year low figures show this morning. This follows Japan’s Nikkei index which closed earlier at a 26 year low, causing investors to fret about global economic slowdown.
Market Strategist, Neil Parker from Royal Bank of Scotland said;
“There’s lots of volatility, not just in the equity market, but in the interest rate and currency markets too, we’re going to get further big swings as the markets watch for what the authorities are going to do.”
The economic crisis is literally a global problem, all markets are down and in many cases are in the worst shape in the last ten years.
The G7 are warning that the strength of the Yen is threatening economic stability and are currently trying to reduce the value of the currency. Though the Yen briefly weakened over the weekend it quickly climbed back to its 13 year high over the dollar. The strength of the Yen is attributed to the carry trade, where traders borrow the Yen in order to buy other currencies with higher interest rates.
As the difference between Japanese and other currency rates grow less and less carry trading has taken place. These traders are now using other currencies to buy Yen which is boosting the currency further.
General trauma in all financial markets and it’s not going to get any better any time soon. I think it’s best for Gordon Brown to let the market run its course… I can just see him scraping this £50 billion together and it going straight down the pan!
Britons are best preparing themselves for a rough ride; markets go through peaks and troughs as a natural economic occurrence. No amount of bail out money will change the current cycle we are in.
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