The Dow dropped over 512 points in today’s trading, the largest one day drop in points since the 2008 crash, arousing fears of a second crisis and a deeper second recession. Given the destructive American debt ceiling debate, its austerity self -imposed straightjacket and the mismanagement of Europe’s sovereign debt problems and the bias of its leadership toward austerity including the very ill informed behaviour of the European central bank this comes as no surprise. The political and economic elites continue to make the same mistakes as the leadership of the leading powers during the late 1920s and early 1930s.
However, there is still time to avert total disaster. This would require a sea change in the policy biases of those in positions of power. Employment stimulus, growth and debt burden reduction through lower unemployment and economic growth should be the top priorities. The conversion of the European central bank into an institution that escapes from its monetarist inflation obsessed blinders and creates a true united states of Europe needs also to be at the top of the agenda.
If that is not possible it is unlikely that the Euro will last very long.
(Update: 8:57 p.m. the Japanese market has so far dropped 4 % as the sell off continues in Asia.)