As the FT notes of markets this morning:
Risk asset investors think they have lost their comforter. And they don’t like it. Not one bit.
The FTSE All-World equity index is down 1.5 per cent, commodity prices are slumping and the euro has hit a fresh four-year low.
US equity futures suggest Wall Street will lose 0.4 per cent at the open, while haven flows are moving into US Treasuries, boosting the dollar.
I do recall being told that cuts would keep the markets happy.
It seems that this is not true.
Massive cuts are promised and the markets realise double dip recession is inevitable as a result. So the markets are not happy.
Now tell me, who was wrong? Markets in the first place? Markets now? Those who said cuts would keep markets happy? Or all three?
The reality is cuts aren't needed.
The reality is that cuts will cause economic meltdown.
Maybe markets now realise that. But who cares? markets are fickle. Markets misprice almost all risk and have no capacity for pricing uncertainty at all - which is why they ignore it and get so much wrong.
Now is the time to say markets in second hand prices of paper - for that is what most financial markets are - should not rule our well being.