Years ago the Greenspan speech used the "irrational exuberance" phrase and the markets went nuts. Now the markets are going nuts, so is it irrational pessimism?
Or the mayor's terms from years ago for Town Center skeptics - negative thinking?
Anyway, the markets worldwide went nuts. Guardian, for above photo [from Getty images], and this excerpt:
Global markets left reeling
David Teather, Ashley Seager and Justin McCurry in Tokyo
Friday August 10, 2007
There were further heavy losses on the world's financial markets today despite central banks stepping in with massive injections of cash for a second day running in the hope of restoring a sense of calm.
The FTSE 100 index in London saw £63bn wiped off leading shares as it closed 3.7% lower, losing 232.9 points to end the week on 6,038.3. It was the biggest one-day percentage drop in the City in almost four-and-a-half years and wiped out all of the gains made by the FTSE this year.
The world's central banks have now injected $323bn (£160bn) into the money markets over the past 48 hours, equivalent to a quarter of Britain's entire annual economic output.
The panic gripping investors has been building over several months, since problems first began to appear in the segment of the US mortgage market aimed at people on low incomes or with poor credit histories, the so called sub-prime market.
As interest rates have risen, so the numbers of people defaulting on those loans has gained pace and, due to the way debt is packaged up and sold on to other banks, the effects are now being felt throughout the financial system.
The complexity of the financial markets has only added to the sense of dread as investors have no idea which institutions own what debt, leaving the markets to be riven by rumour and counter-rumour.
"There is great uncertainty as to how far risks are spread within the financial system and exactly where the losses reside," said Paul Niven, at F&C Asset Management. "The market is trading on fear."
Countrywide, the largest mortgage lender in the US, added to the anxiety today when it warned of a shortfall in earnings because of the "unprecedented disruptions" in the mortgage and debt markets. Shares in the company dropped around 18%.
Washington Mutual, the leading American savings and loan firm also warned that it would be "adversely affected" by the mortgage market turmoil.
The Dow Jones Industrial Average on Wall Street dropped another 200 points in early trade, on top of the 387-point slump on Thursday, before clawing back some ground after the Federal Reserve in Washington ploughed another $16bn into the US financial system, hard on the heels of a $19bn injection early this morning. The Fed had injected $24bn into the markets the day before in the same way. The action is not uncommon for the Fed in its daily management of the money markets, but the size of the cash injections is unusually high.
In a statement, the Federal Reserve said it would "provide reserves as necessary to facilitate the orderly functioning of financial markets".
Japan's central bank had earlier injected one trillion yen (£4.2bn) into the Tokyo market. At close of trade in Japan, the Nikkei 225 average had lost 2.4%. Hiroko Ota, the economy minister, said: "It is hard to tell how the sub-prime issue will affect the Japanese economy right now." The Hang Seng in Hong Kong fell 2.9%. The central banks across Asia and in Australia also took action to calm their volatile financial markets.
Symptoms of the sub-prime crisis have been appearing with alarming frequency in recent days. Yesterday, the French bank BNP Paribas suspended trading in three of its funds with exposure to mortgage assets, while German banks discussed emergency measures to bail out rival IKB.
At the beginning of the week, Bear Stearns co-president Warren Spector resigned over losses in hedge funds because of the sub-prime fiasco.
Enough. Vikings play tonight, first string, first series of downs. Zygi will do well, probably, if the masses get their bread and circuses. Went to Coborns this afternoon - got some bread. Etc.
It is really hard to blame all of this on Town Center. I will not try. But there are those urban legends around, about the butterfly flapping its wings one way not another in Brazil causing El Nino, other coast ...
Are we seeing a downside of globalization? Are we seeing that economists liking the lingering rational markets modeling need to take up plumbing? Is "behaviorial finance" an answer, or just another buzzword?
It is a bleak picture. It affects us all. It is a severe wobble in the machine.