By all means neccessary

That what the G7 leaders what they will do to unfreeze credit and money markets as well as reducing the impact of coming global recession (complete article here, complete G7 communique here).

Let's hope that the meetings of finance ministers in DC show similar resolve and more detail

Krugman - Minister of Finance of the world, (please) unite!

Krugman always has a knack for explaining complicated economics stuff. This time he outdo himself (click here to read in full):

The current crisis started with a burst housing bubble, which led to widespread mortgage defaults, and hence to large losses at many financial institutions. That initial shock was compounded by secondary effects, as lack of capital forced banks to pull back, leading to further declines in the prices of assets, leading to more losses, and so on — a vicious circle of “deleveraging.” Pervasive loss of trust in banks, including on the part of other banks, reinforced the vicious circle.
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But on Wednesday the British government, showing the kind of clear thinking that has been all too scarce on this side of the pond, announced a plan to provide banks with £50 billion in new capital — the equivalent, relative to the size of the economy, of a $500 billion program here — together with extensive guarantees for financial transactions between banks. And U.S. Treasury officials now say that they plan to do something similar, using the authority they didn’t want but Congress gave them anyway.
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The question now is whether these moves are too little, too late. I don’t think so, but it will be very alarming if this weekend rolls by without a credible announcement of a new financial rescue plan, involving not just the United States but all the major players.

Why do we need international cooperation? Because we have a globalized financial system in which a crisis that began with a bubble in Florida condos and California McMansions has caused monetary catastrophe in Iceland. We’re all in this together, and need a shared solution.

Why this weekend? Because there happen to be two big meetings taking place in Washington: a meeting of top financial officials from the major advanced nations on Friday, then the annual International Monetary Fund/World Bank meeting Saturday and Sunday. If these meetings end without at least an agreement in principle on a global rescue plan — if everyone goes home with nothing more than vague assertions that they intend to stay on top of the situation — a golden opportunity will have been missed, and the downward spiral could easily get even worse.

What should be done? The United States and Europe should just say “Yes, prime minister.” The British plan isn’t perfect, but there’s widespread agreement among economists that it offers by far the best available template for a broader rescue effort.

And the time to act is now. You may think that things can’t get any worse — but they can, and if nothing is done in the next few days, they will.

Minister of Finance of the world, (please) unite!!

Ten percent lost and in suspension

The graph said it all

The Upcoming Financial Crisis... in US?

Germany's market was down 7.4 percent, Japan's 3.9 percent and Britain's 5.5 percent. Hong Kong's Hang Seng index nosedive 8.6%, Tokyo's Nikkei 5.7% and Mumbai's Sensex 12.9%.

Time Magazine call it a worldwide mini-meltdown. George Soros declare it as the the worst market crisis in 60 years

In his book entitled The Return of Depression Economics, Paul Krugman wrote on how bad things could happened to good economy largely due irrational expectation and market psychology.

But can good thing happened (for a while) to a badly managed economy? Let me quote rather lengthily from Krugman’s recent article on New York Times:

“Mexico. Brazil. Argentina. Mexico, again. Thailand. Indonesia. Argentina, again.

And now, the United States.

The story has played itself out time and time again over the past 30 years. Global investors, disappointed with the returns they’re getting, search for alternatives. They think they’ve found what they’re looking for in some country or other, and money rushes in.

But eventually it becomes clear that the investment opportunity wasn’t all it seemed to be, and the money rushes out again, with nasty consequences for the former financial favorite. That’s the story of multiple financial crises in Latin America and Asia. And it’s also the story of the U.S. combined housing and credit bubble. These days, we’re playing the role usually assigned to third-world economies.”

America, you are next!

P.S.

Stiglitz propose a series o policy to stop the downturn here