Panic on the streets of London

Its Monday, it must be a meltdown.  I was going to open tonight by suggesting that matters would be immeasurably improved if every stock and bond trader on earth had to wait 24 hours and have a really nice calming cup of tea between receiving a piece of information and making a trade.  The idea here being that a little cooling off period might help forestall the storm-fronts of fear (or, in the olden days, irrational exuberance) that pass through the markets.  Then I stopped and thought about it, and realised that the bastards have had all weekend to take the dog for a walk and drink calming cups of tea, and what to they do?  Come into work on Monday morning and TOTALLY FREAK OUT.  

Unless you've been doing something interesting today, rather than sitting at work and watching the FTSE attempt to tunnel straight to hell like the rest of us, you'll realise that stock markets have gone down.  A lot.  There are couple of things about this that make me properly nervous.  

The first is that they've had all weekend to be happy that the Paulson plan to save the world has passed Congress, and furthermore all of Congress has buggered off to campaign for their cushy jobs and can't do any more mischief.  Instead, our old mate the market is now worrying that the bailout isn't big enough (to put the bailout in scale, if they divided it up between the entire population of Great London it would give everyone $93,000 - so it ain't small), and that the US treasury can't administer it.  Seeing as the US Government under the Disgrace can't administer their way out of a paper bag, they may have a point there.  Still, there must be some competent people left.  Please?

There's also been more bad news.  Fortis, a huge Dutch / Belgian bank that no one had heard of has been part nationalised and broken up.  Another huge German financial institution that no one has heard of is also boned.  Iceland appears to be headed back to the dark ages, which is bad news for Iceland because that's not a country where I'd choose to sit out a dark age (I'd pick Italy, I reckon) and also bad news for the rest of us, because last time they ran out of land and stuff they kicked off in a major way.  Wouldn't want to be on Lindisfarne right now, that's all I'm saying.  Meanwhile the German government is guaranteeing all deposits, except it isn't, but its now too late and everyone else is guaranteeing things in a mad beggar-thy-neighbour race to the bottom.

But even after that catalogue of doom, there is another reason I'm a bit nervous.  Its this: lots of bad things are happening, but I'm not sure that they explain the fact that the FTSE has had its biggest ever one day fall, and the Dow is also gyrating like a drunk stripper, but with less class.  In fact I don't think anything really explains the hysterical falls in the markets, and that's what worries me.  Panic is setting in.  Not fear, or horror, or dread at loosing your shirt on a swop deal with Cuban penny shares, but actual, stone cold, panic.

Now panic is irrational, which means that no rational act by Government or God almighty or Warren Buffet can defuse it.  It replaces reason, annihilates thought.  Its is extreme and overpowering.  The Greeks thought it was caused by the God Pan himself, and they also thought that those whom the Gods wish to destroy they first make mad.

(Incidentally, the thought of that Greek sense of panic - a sudden irrational, overpowering fear overcoming someone in a lonely spot, is a deeply chilling thought.)

Anyway, my point is this - if the markets are panicking, then this is the moment it moves utterly out of control.  If it continues to drop, we'll get closer to the capitulation moment, which is sort of the event horizon for financial Armageddon.  Its the moment when traders think, 'ah fuck it' and sell everything no matter what the price.  Chaos ensues.