Tuesday, 22 January, 2008
- 22 Jan 08, 05:05 PM
Another day of turmoil on the markets. The US Federal Reserve tried to pre-empt the opening of the US stock exchange with a whopping 0.75% cut in interest rates. Even so, the Dow Jones dropped sharply within minutes.
Tonight, we'll devote much of the programme to analysing what all this means. Paul Mason will look at the impact on the global economy, and Stephanie Flanders will assess what - if anything - the government and the Bank of England can do to prevent a downturn here. We'll be re-convening Newsnight's own Monetary Policy Committee. Do they think the Bank should follow the Fed with a cut in interest rates next week?
Also - some have said it's the most bad-tempered Presidential debate they've seen. Barack Obama and Hillary Clinton may be in the same party, but last night's Democratic laid bare the growing ill-feeling between the two candidates. So catty were the exchanges that the third and largely overlooked John Edwards ended up appealing to both candidates to stop squabbling and think about the bigger picture. We'll be speaking to a leading Democrat about whether the tone of the race might damage the party in the long term.
And - the government wants everyone to learn cookery in school. They hope it will mean Britain's kids will eat more healthily. And tomorrow, ministers will unveil their strategy to combat obesity. So we've been back to visit a group of teenagers we first met late last year. They were on a special programme - called MEND - which aims to help them lose weight by bringing the whole family into the process. Lots of them really benefited from the course. Six months on - how are they doing?
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Having seen the effect of the Feds rate drop on global share prices, it will be interesting to observe the medium and long term consequences. I couldn't see the Bank of England resorting to such desperate measures. I'll be very interested in what the Newsnight Monetary Policy Committee have to say tonight.
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Frankly I wish you would try to forget about what these over-funded American would be's are doing. It bores me to tears, and only encourages our petty politicos to think about BIG MONEY POLITICS, the prospect of adopting it excites them. Look at the facts: we had never heard of most of the prospective candidates before this particular circus began its show, and we will only vaguely remember most of them afterwards[if at all]! Proof? Tell me, without looking it up, who was the 'also-ran'to JFK when he was elected? No? To Nixon? Of course not, unless you are a student of politics.....
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Hi Newsnight
I read in the papers that the US candidates are mentioning Ronald Reagan as one of the Great Presidents,
I read in a book that he said something along the lines of being able to do anytthing so long as you do not mind who takes the credit,
that said re the current battle in America between Obama and Clinton and similar battles world wide between those who would hold power...
(over others)
what is it really about......?
Does it really matter who runs the show so long as the circus moves on, ie the World gets better, a kinder more just place, the weak are protected, we live in peace with each other, etc
or is this really about personal ego and personal inadequacy, otherwise the last thing any candidate would do would make comments about their rivals that would hurt whoever is finally endorsed by their party for the race,
surely?
best wishes
Bob
ps will is be souffle or meat on the menu tonight?
ie what is an interest rate cut really about, what does it mean,
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High finance can only be compared to sub-atomic particles which behave entirely differently while appearing and disappearing and transforming.
Shares in a company go up after staff cuts ; in the City rewards have no connection with the activites of the players who distort in particular the housing market so can buy several houses while others cannot afford a home.The very rich pay as little tax as possible but often have great influence on the society. They live in a parallel universe with a theoretical morality - for others. There is no doubt that inequality may or may not be a good thing as a concept but it is bringing back the sorts of crime that greatly diminished after the war for some years. We even use violence and sexuality as entertainment and express surprise and disgust at the reality. If such visual entertainment has no effect, why are advertisers wasting their time, efforts and money?
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Some thoughts on the efficacy of raqte cuts, from my favourite NYC columnist, Alan Abelson:
Good old Uncle Ben, then, the markets exulted, would lead us out of the slough of despond. Which on a little reflection appears to be another of those proverbial triumphs of desire over experience. Seemingly forgotten by the Street in its celebratory mood was that the Fed had already cut interest rates twice this year, and to not very much avail.
On Sept. 18, it practiced its cutting swing for the first time in over four years, lopping off half a point. Confident it had the hang of it, the Fed took another slice out of rates on Oct. 31, this time a quarter of a point. In both instances, stocks rallied in expectation of, and response to, the moves, only to fall back rather quickly.
More specifically, on Sept.18, the Standard & Poor's 500 index stood at 1519.78; it managed to get as high as 1565.15 on Oct.9, only to retreat to 1500.63 10 days later. When rates were lowered on Oct. 31, the S&P, again in anticipation, had been rallying for a couple of weeks and reached 1549.38. Alas and alack, by the end of November it was only 1481.14. In other words, today, two cuts later and despite last week's ferocious rally, share prices have yet to recover to where they were when the Fed began to hack away at interest rates.
Maybe the impact of next week's action will prove more enduring. Or maybe, as we've suspected for quite a while now, the vast and not always benign changes that have so transfigured the financial system in the past decade or so under the Fed's complacent watch and often with its encouragement, have robbed it of much of its clout.
And that was written December 1st!
I reckon Ben, Shrub, Gordo and Darling have only got one gun and a box of blanks. And it's even worse here, cause Gordo's wasted ten good years and has less room for maneuver.
Slainte!
ed
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With a Fiat Economy, is it any wonder that the emergence of the Fiat 500 (actually 1200cc) causes such a disturbance to world markets ? The Fiat Cinquetento should not be allowed to be reissued ! And yes, fiat economies do allow money to appear and dissappear from the ether as their perceived rated value varies from their true proven value. Heisenberg's wallet was both overflowing with cash and full of unpaid bills simultaneously. Thanks to the Nazi's however, Einstein rejected the matter of consumer economy, only proved conversion of matter to energy with the burning of all possessions. Without an affordable Spacetime, there is nowhere to put matter. Unification laws have been problematic ever since. The lunar mass standard should realise a truer international monetary value, as money does not travel at the speed of light, and it should exist in time and space, otherwise it is infinite energy with no mass.
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When the Government says we are in a better position than other countries to handle the economic turmoil, nobody believes them. This is despite an excellent economic record including the longest period of sustained growth in over 200 years. What do they have to do to be trusted with the economy?! Nobody is denying that there are choppy waters ahead and that recession is a possibility, but at least we approach what鈥檚 ahead from an advantageous position.
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Why did the live online stream of Newsnight cut out at the start of the US election story with a message saying "This footage cannot be broadcast due to rights restrictions"?
If this was an issue of rights restrictions may I suggest the following
a) In future you do not use footage which causes your online viewers to be cut off without any warning
OR
b) You at least leave the sound feed on for the duration of the story.
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I tuned into Newsnight last night when I got home from work to see the usual flock of knowledgeable dinosaurs chewing over the economy and the mess the banks have got themselves into through their policy of irresponsible lending. I was about to switch channels but stayed tuned thanks to the gorgeous Stephanie Flanders sat amongst them looking cool and sexy and talking sense. Can we have more of her please, I may become a regular viewer!
ps the football was pants as well!
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I tuned into Newsnight last night when I got home from work to see the usual flock of knowledgeable dinosaurs chewing over the economy and the mess the banks have got themselves into through their policy of irresponsible lending. I was about to switch channels but stayed tuned thanks to the gorgeous Stephanie Flanders sat amongst them looking cool and sexy and talking sense. Can we have more of her please, I may become a regular viewer!
ps the football was pants as well!
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Excellent Jeremy last night (52/10) !Loved the discussion on the economy with Irwin Stelzer, Nigel Lawson, Stephanie et al.(And the standing shots of Jeremy were superb :-) )
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The Fed's decision to reduce their interest rate by 75 basis points yesterday, together with the US government's promise of a fiscal stimulus was because the losses suffered by the banking system will result in a fall in the money supply with serious risk of recession and possibly a depression. What we don't know is what proportion of the US population is affected by the credit crunch and to what extent. This means we also don't know the extent of the expected reduction in US Gross National Expenditure and by definition Gross National Income and the impact of that on the world economy.
As For the UK, my fear is that a significant proportion of the population are suffering from the credit crunch resulting in a reduction in their ability to spend as they have in the past. Such a spending squeeze is being compounded by increases in the costs of fuel and foodstuffs for which demand is inelastic and the high and increasing council tax. For the UK therefore a reduction in Gross National Expenditure and also Gross National Income will impact on employment with a serious risk of a recession. Because of our high costs I cannot see any possibility of correcting the trade imbalance by an increase in exports and the government deficit rules out a fiscal stimulus. It also appears that the Bank of England will hammer the final nail in the coffin through their reluctance to reduce interest rates because they will insist on equating increases in the prices of foodstuffs and fuel which are due solely to supply and demand, with inflation.
What makes this economic adjustment different from those of the past is its global nature and impact. Although politicians are primarily interested in their own back yard, it is this last point that is realy worrying the US government.
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Excellent discussion last night about the current financial situation. Thank you.
My one criticism: Nigel Lawson. Why on earth did you have him there??
He added nothing to the discussion, despite being inclined to opine, and was rightly corrected by each of the 2 experts present. His final reply to Jeremy Paxman's question "should we believe the government" was utterly risible! Yes of course we know incumbent politicians will offer words of reassurance, the question was do we have grounds for believing them!
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