It could have been worse

This last quarter was bad, says Tom Petruno in the Los Angeles Times, but many investors are pleasantly surprised “that things weren’t a lot worse.” Even though U.S. markets had their “heaviest losses in more than five years,” most “key stock indexes” here were down less than 10 percent. There “was plenty to fear,” with the “wrenching credit crunch” and consumer malaise, but the market apparently “isn’t convinced that the economy is headed for even a recession, let alone something worse.” Foreign investors “appear more vexed about the economic outlook,” but if U.S. consumers keep on spending, maybe the economy won’t go “headed off a cliff.”

The Tinker Bell market bust

We’re at the end of “a Tinker Bell financial market,” says Allan Sloan in The Washington Post. Highly leveraged money, borrowed in a market that “could exist only as long as everyone agreed to believe in it,” has “vanished like pixie dust.” And giant banks “are, to use the technical term, scared to death”—with good reason. In a normal recession, the economy slumps and the markets follow. But “in this slowdown the markets are dragging down the economy,” and the last time that happened we got the Great Depression. That’s why the Fed is, rightly so, “throwing everything but the kitchen sink at today’s problems.” Its just too bad that taxpayers will pick up the “huge” tab.