Tuesday 18 September 2001

Pic of the day: I have paid out my credit cards. How about you?

Crash on Wall Street

I have to admit, the Fall of the Towers came on a really inconvenient time in the economic cycle. America, and with it the world, perches on the brink of economic recession. Careful planning has gone into making the economy slow down enough, but not too much. Enough to give some breathing space. To weed out the most ridiculous enterprises that have been burning off people's money cheerfully for the laste couple of years, for instance. But without hurting consumer confidence.

I dare say that consumer confidence is pretty low right now. It is one thing to not know if you have a job tomorrow. It is quite another to not know whether you're even alive tomorrow. Confidence it ain't.

It is hardly surprising, then, that the first day of trade saw Dow Jones plummet by 7.1%, and Nasdaq only slightly less. Certainly it is less of a tragedy than the fact that some of the traders from a week ago weren't there at all. Stocks rise and fall. But when men and women fall, they rise not again so soon.

***

I am not happy to see the American economy crumble at such speed. But there is a silver lining. Now it will be possible to cut interest rates furiously, without people rushing off to shop their credit cards out. The new, sober American will probably start to repay his debt; and this will be made much easier by the low interest rates. When interests are high, you may feel that you are paying quite a bit; but the debt remains. Lower interests are good, at this time of the economic cycle. (Or economic wave, to be more realistic.)

For the economy to pick up again before too long, energy prices will have to go back down. The panicky hoarding of fuel cannot last, as long as it is driven by private parties. But on a national scale, it may be important for the USA and NATO to placate the Arab world, which is still the most important supplier of crude oil. (Even though Norway is actually the world's second largest oil exporter - yay Norway! *waves flag and reindeer horns*) Sadly, there may be forces in the US right now that want anything but placate Arabs. We shall have to wait and see how this turns out.

But whatever happens in this rather unexpected plot, it will concern the whole world for quite a while. So while economics is often called "the dismal science", the economy does bear watching.