WORLD> America
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WORLD> America
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More anxiety on Wall St.: Stocks dive, oil soars
(Agencies)
Updated: 2008-09-23 09:03 "When you try to print $1 trillion, that will kill your currency, lifting oil prices, which then in turn will not help the stock market," said Gary Kaltbaum, who runs the money management firm Kaltbaum and Associates in Orlando, Fla. "It is a vicious cycle, and we are seeing that right now." Lacking specifics, many investors — especially foreigners — sold US dollars on worries that paying for the plan would increase the federal deficit and exacerbate inflation. Over the past year, overall inflation is at 5.4 percent. The 15-nation euro rocketed past $1.48 in late afternoon trading Monday, up more than 3 cents from Friday in its largest single-day move against the dollar since the European currency was introduced in 1999. The British pound leaped to $1.8584 from $1.8365, and the dollar dropped to 105.40 Japanese yen from 107.01. The Dow finished at 11,015.69, down 372.75 points, more than 3 percent. The sharp drop was reminiscent of last week's wild trading, which included two days of 400-plus-point drops for the Dow and two days of 300-plus-point increases. Credit markets, the lifeblood of the economy, loosened a bit. They had seized up last week when Lehman Brothers Holdings Inc. filed for bankruptcy protection and the government rescued giant insurer American International Group Inc. with an $85 billion, two-year loan. Late Sunday, Goldman Sachs and Morgan Stanley, the country's last two major independent investment banks, were granted government permission to change their status to bank holding companies and open commercial banking subsidiaries. As Wall Street sold off, Washington was tinkering with the plan, trying to find a compromise that Congress and the Bush administration could present to American taxpayers who would be footing the bill. "The whole world is watching," President Bush said, prodding Congress to quickly pass the plan. By the time markets closed Monday, the Bush administration and leading lawmakers had agreed to tack mortgage help for homeowners and strong congressional oversight on to the legislation, said Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee. Even assuming it passes, the bailout might not be a quick fix for the economy or financial markets. According to research by economists at Merrill Lynch, after the Resolution Trust Corp. was established in 1989 to stop the savings and loan crisis, it took a year for the stock market to hit bottom, two years for the economy and three years for the housing market. After Japan put a bailout plan in place, its stock market took another five years to recuperate, and by some measures, its economy still hasn't had a sustainable recovery, according to Merrill's chief North American economist, David Rosenberg. "This is a complicated process that will encumber the economy for many years," Battipaglia said.
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