The violent up and down swings in global markets have not subsided. This morning stocks around the world are tumbling. Asian stocks declined as the Nikkei 225 fell 6.8% and the Hang Seng tumbled 6.2%. European markets opened lower with the DJ Euro Stoxx 50 index losing 2.7% and the FTSE 100 index in London down 3%. Dow futures look to open lower by 1%.
There are all sorts of unpleasant surprises popping up around the world. A Japanese electronics company forecast 90% lower profits; Hungary raised interest rates to curb a decline in its currency; Argentina nationalized its pensions to prevent a default. What we are witnessing is the intersection of a highly globalized and interconnected financial architecture blowing up and exposing a global regulatory structure that lags woefully in its ability to measure or repair the problems.
Global leaders are trying to cope with the problem as best they can. Unfortunately, none of them seem to understand fully what is going on. I am taking my view of this to the Wharton Club of Boston tonight -- addressing questions such as: Where are we now? How did we get here? What should people do about it? What should the new financial architecture look like?
One piece of good news in all this is that the dollar has gained 25% since July 15 against the Euro -- that was around the time that oil peaked at $147 a barrel -- it now stands at $69.61.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.
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