THE BLOG
11/07/2008 05:12 am ET Updated May 25, 2011

The Bailout Bill Passes Congress, President Signs the Legislation, and the World Is Saved. Not.

Well, on Monday October 6th, that crucial first Wall Street operational day after the rescue, the Dow Jones Industrial Average dropped a tad more than 800 points at one point--once again the worst one day drop in history--but settled at only minus 370, at 9956, about 30% lower than a year ago. For about the tenth time this past month in my daily blog I again underscored the danger of metastability. The fatal fear is that we are losing control of prices.

Reassuring, though, that the German, Paris and Tokyo stock exchanges have also all sunk 31% this past year, with London at minus 27% and China (Shanghai) a staggering minus 67%. They, too, all are bailing out banks and other financial institutions. Thus, you can't really only blame Wall Street, the White House, Congress, McCain and Obama. This seems to be a world-wide phenomenon.

Interestingly, precious metals have also dropped in the 30-70% range the past few months, even gold. Usually, investors switch to very low interest federal bonds or gold in time of coming crisis. Gold did rise a few percent today, but remains below what it was this past Friday. So there is some uncertainty in this reactionary front complicating the tea leaf readings.

The U.S., of course, sets the tone for the globe, and eight years of Republican free market policies no doubt laid the table for the crunch. The Bush Supreme Court aided by preventing state regulators from mortgage loan oversight (April 2007 decision). From all perspectives, this "keep the hands of government off business attitude" is the root of our financial crisis.

Ominously, my HuffPo prediction of $75/barrel oil seems to be happening, as NYMEX crude futures slipped below $90/barrel to $88.51/bbl, while the Brent Spot is now at $83/bbl. The growing world recession is reducing consumption, so there is weakening competition for the available oil. OPEC President Khelil today predicted that oil prices will continue to drop next year. Will we see $50/bbl oil in 2009? If so, don't be surprised if all those already announced billion dollar renewable resource projects begin to lose financial support. We saw it when Reagan became president in the early '80s and a decade ago when the price of oil (in real dollars) hit an all-time low. Here we go, back to the past again. See Chapter 1 in SIMPLE SOLUTIONS for Planet Earth (box on right). That's why it's ominous.