The world as we know it would seem to be coming to an end. Oil prices have risen through the $140/bbl level, stock indexes globally are trading at or below their lows for the year (no small feat), and the USD is on the verge of collapsing. And yet, the feeling of panic that accompanied the last visit to the edge of the abyss does not seem as much in evidence. Instead, this time around the aura seems to be one of resignation and helplessness. Of the two episodes, the current one seems more ominous in the sense that solutions seem less available. Key central banks have already largely exhausted their ability to provide monetary stimulus and are now constrained by runaway inflationary pressures. The financial sector, having assured markets a few months ago that the worst was behind them (I cautioned readers on April 18 "Don't buy it"), are back under the gun and financial system stability is being threatened anew. Central bankers have cautioned that additional bailouts are less likely and this raises the prospect of more severe financial sector stresses than before. Consumers globally are being pummeled by rising food and energy prices against a backdrop of slowing economic growth and restricted credit. If there is any light at the end of this tunnel, it seems very far off and likely a mirage.  Full text »

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