ZAY Blog

Well, not quite, there is still hope that the senate would bring it back to live some times later this week.

However, the collapse of Wachovia, the bank that could be saved if the loan programs have approved earlier, as well as the plunge of the major index around the world, clearly indicated that this is an issue that can not be waited…

How long will the politicians in Parliament Hill figure out that Americans do need to save Wall Street?

I am not saying the traders in Wall Street have done the right thing to use the money that they are not prepared to pay back, however, what is right and what is wrong no longer matters, because Wall Street is not only a financial hub of the world, it is, more importantly, the dominant factor of the US economy. If Wall Street fails, every ordinary American citizens would be affected, not just the traders or the investment bank executives.

Sometimes, I am wondering if democracy is really a great idea in time of crisis, because it is difficult to explain to every single individual (or even the majority) of the impact of certain things, not because general public are ignorant by any means, but rather we are specialize in different things.

For example, it is difficult to convince a farmer whose sole interest is to be able to sell the cattle he has raised that 2000 dollars from his tax money has to be given to the financial market.

He is probably really good with raising cattle, far better than the investment bankers could do, but that does not mean he could be educated enough to see the entire economy.

On the other hand, we can see that in the current milk-poisoning crisis, the Chinese government is spending taxpayers money to compensate the lose of the diary farmers.

This may be a somewhat authoritarian in the eyes of Americans, since every single Chinese citizen (or those who pay tax to the Chinese government at least) is basically paying for something that they have nothing to do with.

However, in this case, by ensuring the survival of the Chinese diary farmers, China has shown to the world that it is acting more responsibly, as well as more maturely, in time of crisis.

Which is very different from the irresponsible manner that the congressmen and congresswomen is showing ahead of the elections.

I was really thrilled to hear that the senate has finally approved the package to save the financial world.

I am not sure how much the collapse of Washington Mutual would have made those senators feel that they finally need to do some work rather than arguing all over the place to maximize their political profit, but the fact that the agreement was reached on Saturday midnight is really an assuring fact to know.

However, what we have seen so far is a really disappointing picture in the Asian market, with the financial stocks continue to decline.

Why is that so?

Because people no longer have any confidence in the US economy.

Sadly speaking, the financial market in US would not stop to deteriorate just  because of the 700 billion. In fact, some analysts claimed that the market needs as much as 5 trillion dollars in order to go through the current mess without getting hurt too much. Unfortunately, the fact that the rest of the world is reluctant in joining the US in saving the financial market means that it is very unlikely the government will be able to raise the fund.

On the other hand, even within the US government, as election approaches, no one seems to have that much interest in asking each US citizen to pay more than 2000 dollars to save the mistakes made by the Wall Street traders. Instead, they have promised tax reduction, which would means that the government would not be able to provide too much to save Wall Street.

However, what should we expect when the market opens tomorrow morning?

First, I think Wachovia is saved for now, after being treated as the next victim after Washington Mutual, therefore, we should see some good news for WB to bring the highly undervalued stock back a little.

Second news should be from the currency market, where we should see some advance in the US dollars as people are now confident that the wound would not be as large. On the other hand, the LIBOR and treasury should be a little lower as the financial institutions (even those non-US companies with large business presence in US) find themselves a little easier to borrow money to solve their liquidity headaches.

Let’s hope that this 700 billion dollars would really be able to give the investors some confidence, because…well, hope is all we have.