Abstract:

Imagine someone would have told you two years ago that mid September 2008 unrivalled stars of Wall Street and international financial markets are wondering where the boom is gone, after enjoying years of bright sunshine in financial markets. During the last weeks the ongoing financial turmoil has created a climate of fear, leaving financial intermediaries feeling that it is not warm anymore as the boom is away. Indeed international investors seek shelter - as the boom is gone - and the current global financial gale leaves darkness on global financial markets. We guess that not only your answer, but also the reactions of most analysts from Tokyo to New York – including Nobel laureate Paul Krugman - would have been something like: “I have got a good gut feeling that you are insane”. Such analysts would most probably have advised you to stop panicking and instead immediately to frequent your psychiatrist. Ironically, exactly the same analysts now may have a strange gut feeling and are seemingly in trouble to explain reasons for the sudden storm on international financial markets. In the meantime, above New York, Frankfurt and Tokyo central bankers are steering helicopters with billions of Dollars, Euros and Yen with hardly any substantial result yet. In addition policy makers around the globe are trying to deliver relief by virtually flooding the war chest of panicking financial intermediaries and by promising to keep them going in any case. However, in this situation a deep drag off the printing press does not seem to still the thirst for liquidity in financial markets. At this stage most analysts and policy makers, including the ones with distinguished gut feelings, cannot get on grips with their animal spirits and are longing for a ray of financial sunlight.