The coming week will rank as the worst ever to hit the world when this week comes to a close. The DOW, already below 10,000 points for the first time in five years will probably bottom out around the 8,000 level by Friday. Banks will continue to shake, rattle and roll in an atmosphere of takeovers as the industry tries to sort out the good from the bad. Until banking finds its bottom credit will continue to be difficult to find. That's the good news.
It will surprise nobody when jobless numbers, reported on the first Friday of each new month in the US, hit double figures in November. Christmas is generally the engine that drives the domestic retail market in the US; this year will reflect the first in a series of measures that show the economy as stagnant. Defaults and bankrupts will set new records. Auto sales will be the lowest, and possibly lower than during the 1973 oil crisis.
The surprise in all this is the drop in commodity prices. Gold is still below $1,000 per ounce and the price of oil is still dropping. Common sense says these should be safe havens for capital - with a corresponding rise and yet they remain lower than I expected. Spokespersons say it is because of lower demand, but with winter coming on in North America, Europe, and Asia, the price of oil must rise.
The problem is value: Until the markets - housing, stocks, commodities, etc., bottom out and the debt tally is truly comprehended, it would be foolish to pour money into them and expect a miracle. That many banks will collapse is a certainty and it will take some time before those losses are written off and their assets absorbed into healthier financial institutions. Many countries are now guaranteeing all their deposits, but as the economy worsens it will not take much to see people withdrawing funds at the first sign of commodity increases. If there is a panic bank run the result will not be banks failing - countries will begin to crumble.