The major central banks have lowered the interest rates. That may stop the stocks to drop for a few hours. Then it will occur to someone that interest rates do not matter if no bank has the capacity to lend.
The great de-leveraging continues apace. Billions of imaginary wealth kept as assets in the books went ‘poof’. Covering those losses ate away from the basic capital of the banks. To keep a reasonable debt to capital ratio they needed to sell stuff into declining markets and to recall loans they made. That is a downward spiral which is hard to stop. Until a bottom is found, the banks will have no capacity for new big loans.
Two trillion of retirement savings in 401ks and pension funds were lost in the last 15 month. There are some hard times coming for a lot of people. It will be even harder if this crash continues
The Fed and the Treasury as well as their international companions are still behind the curve. Instead of acting forcefully, each week they add a new trough for Wall Street to feed on.
The crisis is so out of control that monetary tools are losing their effect. There are some things only national states can do and now such things need to be done in a worldwide concert:
- Close financial markets worldwide for a week, longer if needed.
- Declare all outstanding financial derivatives (except covered puts and calls on simple stocks and covered commodities derivatives) and synthetic financial products null and void.
- Reassess the balance sheets of all bigger financial entities under the new realities.
- Triage those entities: Some are too broken to be saved. Close them down. Some will need capital. Nationalize them. Some will be fine.
- Take over and destroy the excess housing supply that threatens to draw down U.S. housing values and the correlated assets deep below reasonable levels.
- Initiate a huge infrastructure repair program to reignite the basic economy.
Those steps can be taken now, or in six month. Now they could help. Six month from now there will be so much damage done to the real economy, that a very deep and multi-year long recession will be needed to recover.