This Time is Different

Manifesto

The Federal Reserve announced the biggest single cut in the Federal Funds since 1984, and the first mid-meeting emergency cut since 9/11. It would seem current events have made this NY Times Sunday Magazine article required reading. To sum up how the rest of the world did yesterday, trading in the major indices was off as follows by country:

• India (-7.4%)
• Australia (-2.9%)
• China (-5%)
• Japan (-3.9%)
• Brazil (-6.6%)
• U.K. (-5.5%)
• France (-6.8%)
• Germany (-7.2%)
• Spain (-7.5%), and,
• Canada (-4.3%)

To top it off, US Market futures for this morning (prior to the Fed's announcement) pointed to a precipitous drop of 527 points for the DJIA.

The interesting about link between the foreign markets and our own is it seems to torpedo the popular theory of decoupling (that the global economy was resilient enough to withstand a slow-down in the US). So, I guess we can add Decoupling to the list of now debunked popular theories, along with:

• The business cycle has been defeated
• Gains in real income don't matter
• Supply side tax cats pay for themselves
• Reversion to the mean can never happen
• There is no inflation

I'll omit "housing prices can't come down", and "sub-prime could never impact the larger markets" - those were never reasonable theories, just wishful thinking.