Monday, October 13, 2008


The corpse candle, in Welsh mythology, is an apparition that manifests when someone is fated to die. The illumination is also known as ignis fatuus (foolish fire) or the will-o-the-wisp that leads unwary travelers to a boggy death. Wall Street traders, in the aftermath of the government bailout , are following an ignus fatuus to their destruction. There is no substantial basis for rallies on the Street because stock buyers are pursuing the same leads that took America to finacial ruin.
According to news reports, stock speculators are buying stocks in those banks and investment companies that require government bailout or corporate buyouts such as Morgan Stanley, Citigroup, and Goldman Sachs. They are not buying conservative bank stocks, banks that have been less careless with investments, like Wells Fargo whose House Mortage fund is rated 'AA'/Outlook Stable by Fitch Ratings. Stockbrokers, instead of prudence, are once again going after the risky money that they believe will pay off big but which left them (and the world) with nothing.

This crazy optimism ignores some fundamentals to the economy. I am sounding like a broken record but there is no money in the United States Treasury to pay for the bailout. Second, stockbuyers are ignoring that the retail sector is posed to take a significant dive due to the twin evils of the credit crunch and record unemployment. This will be a bleak Christmas because stores are set to have weak sales and less need for temporary workers. The unemployment levels are at record highs and will probably rise from 6.1%. Bill Gates, speaking at Harvard Business School, thinks that unemployment might rise to 9% of the American population. People are cutting back on spending by not buying goods except for those necessary to keep life together. They are purchasing what they can at discount and thrift stores. Stores, as a consequence of this fear, will be unable to continue and will lose more workers. Fewer workers will mean less purchases and a stagnant flow of money in the economy will loop back to create a nasty cycle of more lost businesses.

So what is the answer? Regardless of which political party takes the White House there will always be those who want the quick buck, damn the consequences. The most effective and thought- filled response is to invest in real goods such as manufacturing equipment, employee training, and savings. This is the correct and safest way to create wealth in a society. The paper-chasing speculation that has destroyed the world economy must stop if global financial stability is to be achieved.

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