Wall Street tumbled again Wednesday as investors worried that the global economy is poised to weaken even as parts of the credit market slowly show signs of recovery.
Updated: March 24, 2011 1:28AM
The world's stock and commodity markets are pricing in a global depression. That's the only way to understand the staggering declines not only in the major stock indexes Wednesday, but the greater percentage losses in commodities that are the raw materials of the industrial economies of the world.
The stock market declines -- the Dow was down another 514.45 Wednesday -- make headlines of a magnitude we instantly understand, watching wealth evaporate into thin air. The market's fear of the unknown in the credit crisis has been replaced by the reality of declining profits for business.
Not so obviously, the commodity markets are also predicting that all of that global growth will slow to a trickle. Oil is the most visible commodity to decline -- from its peak of $147.27 a barrel in midsummer this year to Wednesday's closing price of $66.75, a 16-month low. The downdraft accelerated after a report showing rising stockpiles of crude oil, as demand for energy products dwindled.
It's one thing that consumers have to cheer about these days. Not only will gasoline prices fall, but the threatened rise in home heating costs this winter will be blunted.
But a global slowdown is generally bad news -- for Americans, and for workers in emerging economies. It has long been noted that the American consumer was the "engine" of global growth. Now that engine is idling, as individuals can no longer borrow against their falling home equity and have run up huge balances on their credit cards.
And when America stops shopping, China's economy will certainly feel the impact. But for them, it will mean less protein in their food, as well as lower profit for their businesses.
Thus corn prices have also tumbled, from more than $7.50 a bushel in midsummer to $3.85 Wednesday, along with similar declines for soybeans, cattle, fertilizer and other agricultural products.
Deflation -- falling prices -- is making headlines, as assets are written off, representing wealth down the drain. The Fed and global central banks have turned on the printing presses and the money pumps, but so far they are no match for the stubborn credit markets, unwilling to take on any more risk.
The financial markets are predicting the worst of all worlds -- an economic slowdown and loss of confidence. The one good thing to say about a market searching for a bottom is that it will eventually find it. And then the trends will turn up. That's the Savage Truth.