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From The Business Pages, Oct. 29, 2008

  • Time was, a major upward swing in the market followed by a half-point cut by the Fed would send American investors on a buying spree. But that time has probably passed. Today Ben Bernanke and Co. are expected to make another interest-rate cut, but market futures were trending down nonetheless. Is that because they don’t expect it to do much? Because they’re withdrawing from yesterday’s frenzy? Or are they reacting to the renewed drop in home prices and abysmal consumer confidence? (Durable goods orders, though, were up, despite the credit crunch.) How the market reacts to Bernanke’s cut today will tell volumes about the state of investors’ economic confidence, so pay attention.
  • Contrary to the argument put forth by David Rothkopf and others recently, Belarus has said it is willing to liberalize its economic policies to qualify for IMF assistance. Last week I discussed an op-ed by Rothkopf in which he speculated that struggling economies were turning away from liberal capitalism and its attendant international financial structure in favor of less intrusive assistance from China and Russia. Consider this a big strike against that idea: If any nation should be expected to turn to Russia for aid, it would be Belarus. (Meanwhile, Russia bailed out one of its richest men, Mikhail Fridman, allowing him to take a $2 billion loan to pay back Deutsche Bank. Nice life ya got there, Mikhail.)
  • On a somewhat orthogonal note, George Soros has an interesting op-ed in the Financial Times. He calls for the United States to lead the developed world in creating a special fund, or “facility,” for developing nations to draw from instead of the IMF, which he feels doesn’t have the depth to cover everyone. But Soros is unclear how much he thinks the United States itself can do; instead, he calls on “countries with large foreign currency reserves, notably China, Japan, Abu Dhabi and Saudi Arabia … to put up a supplemental fund that could be dispersed more flexibly.” His analysis of the possibilities is correct, but I wonder how much leverage the United States can bring to those states, particularly when it probably won’t be able to contribute its fair share (imagine the political firestorm if the White House proposed bailing out not just banks and auto makers, but Brazil, too).
  • Good piece in the Wall Street Journal about economists trying to figure out exactly when the economy will right itself. The short of it: No one knows. Also, an interesting tidbit: A British economist references Joe the Plumber ("It doesn't matter whether a bank will lend to a bank … It's whether a bank will lend to Joe the plumber") guaranteeing Mr. Wurzelbacher a place in the pop-cultural pantheon.

--Clay Risen