More excitement in the markets: Three days ago we got quoted $0.60 per pound for stainless steel scrap. Today we dropped by with 10 thousand pounds. The manager was apologetic, but they were no longer buying at any price. Scrap metal prices collapsed about in half (at least here on the West Coast), probably due to a lack of buying in China.
And remember my post on the unusual activity at the Federal Reserve? “ For example, it must be noted that business cycles are world-wide” and therefore business cycles cannot be blamed on individuals, political parties, countries, or even continents. The bubbles always burst eventually, and when people in one country see the bubble burst in another, monkey see, monkey do. They act to avoid the consequences of a bubble bursting in their own country and that bursts their bubble. (Hence the famous stock trading advice: Avoid Panic. But, if you absolutely must panic, try to do it before everybody else does.)
Well, as expected, European financial companies are failing and for the same reason US financial companies have had trouble. They did the same thing that US financial companies did. And their equivalents to our Federal Reserve are doing equivalent things.
The human inclination to get over enthusiastic in markets, and to ignore risks, is universal. If you outlawed it one way, they’d find another way to do it. It’s like teenagers and sex. But even worse, humans imitate other humans so the European troubles are identical to our own. Too much debt, and, in this bubble, an inclination to create mortgage backed securities to theoretically decrease risks, part of which is due to physicists. The latest news from Europe: