I GOT up early this morning to check if the European finance ministers who had been meeting since yesterday had made any announcement on their latest plan to "shock and awe" speculators into submission.
Around 8.30am, the plan was finally announced – US$560 billion (S$772 billion) worth of new loans and US$76 billion under an existing lending programme. In addition, the IMF will come up with up to US$321 billion of loans, if necessary.
The announcement was timed before the opening of the all-important Shanghai and Hong Kong markets. But going by the muted response so far, it is obvious that investors are taking a wait-and-see attitude, as they wait for details of the latest package to be released. The speculators may not be appeased by this latest effort by the euro-zone to fend them off.
There are only two points which I want to make at this juncture:
1. When the Europeans announced the 110 billion euro lifeline for beleaguered Greece two weeks ago (it sounded like another era going by the wild price swings which had been experienced since then), the regional markets rallied for only one day.This time, I guess investors will feel no different. Why chase after stocks if they resume falling, if the "shock and awe" plan fails to really shock and awe?
2. If I remember correctly, the IMF only has about US$355 billion in its reserves. If it lends Europe US$321 billion, that will effectively wipe out its entire cash hoard and it will have to go cap-in-hand to members for money in order to fend off future crises. But will up-and-coming member countries like China agree to any cash infusion?
The only bright spot I can see on the horizon is football's upcoming World Cup. Let’s hope that the bond vigilantes are also football crazy and turn to betting on football instead.
This will give the rest of the world some breathing space to come up with what is needed to stabilise the financial markets.
On this note, I must say that I still recall the Beijing Olympics Games two years ago with a tinge of happy nostalgia – the wonderful summer weather and the inspiration one gets from watching the youth of this world putting up their best sporting performances and the high hopes they reflected, which embodied a better tomorrow for everyone.
For an unforgettable fortnight, the global financial crisis was forgotten, as everyone was glued to the TV, watching the events in Beijing.
But the upshot of it all was that the global financial crisis came back with an awful vengeance. Lehman Brothers failed within a month after the Beijing Olympics Games ended.
Be warned.