Panic

WASHINGTON – On yet another black Monday, the global markets collapse

A shoe store has a “recession special” in Washington: buy one get one free.

This time, they seem to be contaminated by a Freudian “death pulse,” where the meltdown feeds back on itself with bad news in the non-financial economy. It is the real economy on the street which will determine the future prices of shares on the stock markets at the end of the analysis. From there the fall: the bet is on a general recession.

The Brazilian market was one of the most punished by this movement, not necessarily by an expectation of a strong cooling of the economy. The Bovespa* was one of the exchanges that was holding up better since the beginning of the crisis. Now it has succumbed, on the track of the real possibility of a strong fall of activity on the entire planet.

A consumer leaves the store that started discounting by up to 50% to sell more.

Strongly influenced by commodities prices, which will be affected by a recession, there was no other possible direction for the Brazilian exchange, if not down.

The crisis also spread more clearly from the U.S. to Europe. At the end of the week, Germany and the United Kingdom had to release official rescue declarations to banks and guarantee bank deposits. The attitude of detachment that the European governments had been adopting a few days ago, as if the crisis were an “American crisis,” was swept away by force.

But the U.S. continues to be the epicenter of the problem. Increasingly clear signals that a significant recession is on the way are accumulating. Never have the banks and consumers of this country been so indebted. Since this is a credit crisis, there will hardly be a quick solution.

Various firms and chains of stores have already understood the gravity of the situation. The word “recession” is already in store windows, and some stores are having sales with discounts of up to 60%. Foreseeing the worst, they are trying to advance themselves some money in preparation for leaner times.

In the market, people are also realizing the enormous difficulties in the implementation of the $700 billion approved by the Congress last week.

Unclogging the credit market, where even the largest banks and firms are having enormous financing difficulties, could take weeks if not months. The Treasury has barely set up the management team for this. The Fed (the U.S. Central Bank) has already understood and is increasing lines of credit and its reach into the market. Yesterday, people were talking about another $900 billion in liquidity.

The developments of the crisis have been increasingly surprising, and the picture is extremely indeterminate. But there is also a lot of panic and irrationality in these movements.

Ultimately, it is another crisis of humanity, with humanity in action.

At the headquarters of the IMF (International Monetary Fund), in Washington, there is an interesting display about the crises of the 20th century, beginning exactly with the crisis of 1929—the source for terms of comparison with the current happenings.

Economics is not an exact science. But it is cyclical, like history shows. The problem, for those who are living, is when we are in the middle of the low part of the cycle. In the case of Brazil, what’s even sadder is that after almost 30 years it seemed that things could finally go right. But they haven’t. All that’s left is to keep on going.

Below, some of the highs and lows of the 20th century:

1929 – Unemployed people protest during the financial crisis in the United States

1950 – Graphs show the recuperation of various sectors in the post-war markets

1971 – The oil crisis yet again puts the global economy in a scene of a recession

1991 – The USSR collapses, the world globalizes and the Russians eat at McDonald’s

*São Paulo Stock Exchange