Thanks Mr. Bush For The Recession

By James Donahue

The only good market news today is that because it is Martin Luther King Day, the US markets are closed. That means the bad news can hold off another day.

The New York Times reports that leading indicators are already signaling that a recession is here. The Dow Jones industrial average plunged 306 points, finishing a 14.2 percent slide from its all-time high in October.

And after 12 days of trading, the Standard & Poor’s 500-stock index is recording its worst January ever. The Russell 2000 index, which tracks small companies, has reportedly slipped into what is described as a bear market.

As the Times reported on Friday: “corrections of this magnitude have coincided with recessions in the past, though not always.” While some slides of this magnitude have been followed by recoveries that left no significant impact, the story notes that there are other signs of trouble in the financial world that cannot be ignored.

The Baltic Dry index, a shipping index considered an indicator on the health of the global economy, also has plummeted. Investors have swayed away from high-risk corporate bonds which can default in times of trouble. And they say a troubling trend is showing up in the S & P 500 where shares of energy and materials companies have also fallen.

Banks are posting massive losses, partly because of the sub-prime lending issue. Housing starts have hit a 16-year low. And the Bush economic stimulus plan, announced late last week, hasn’t seemed to have stirred any optimism.

In other world markets today, where there was no holiday to keep the doors closed, stocks were tumbling. The losses were reported from Germany, Hong Kong, India and Brazil. The MSCI World Index dropped the most since 2002 and Europe’s Dow Jones Stoxx 600 Index sank into a bear market.

There has been an old saying that the American dollar, for years the most stable of all currency, has a strong influence on all world currency. Thus it appears that the recession, or perhaps the beginning of a depression brought on by irresponsible U.S. financial policies, is spreading world wide.