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Journalism of Courage
No one yet knows whether this week8217;s shudders mark a pause before prices glide serenely upwards again or the start of a proper tumble. One apparent cause of the Shanghai slide, a rumour of a planned tax on capital gains from shares, was denied. The market steadied there on February 28th, but fell again the next day. Markets in Europe and elsewhere in Asia were nervous, though Ben Bernanke, Mr Greenspan8217;s successor8230; seemed to have soothed Wall Street. Given that people still argue over the reasons for the crashes of 2000, 1987 and 1929, it would be premature, to say the least, to tie this week8217;s events too closely to basic economic causes.
You can say, though, that the fall in the Chinese market may simply have been the jolt the markets needed to take a second look at the risks they have been taking. The natural starting point is the American economy. Long before it was confirmed on February 28th, the downward revision of fourth-quarter GDP growth, to 2.2 at an annual rate, was expected. And the economy appears to have begun the year sluggishly8230; There had been signs that the bond markets had twigged, with Treasury yields falling in the past few weeks. Until this week, however, the markets for shares and many other things did not seem to have taken all this on board. Now, perhaps, they have.
Excerpted from 8216;The Economist8217;, March 1
