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Technorati Tags: politics, McCain, Obama, Palin, presidency, elections.

Across the Curve:

The fear is most evident in the strength of the 2 year notes which is within spitting distance of cycle lows. It can be felt in the serious reversal in the stock market which at this moment has retraced about 2/3 of the gains of yesterday. It can be felt in the retreat in credit product which has seen large chunks of the advance of yesterday eroded.There is a worrisome view developing today amongst market participants. There is a nascent concern that the commonweal , with the GSE rescue, has fired its biggest bullet, and that there is very little left for the government to do, save loading the members of the FOMC into helicopters with bags of money which they can sprinkle liberally about the countryside.

The Treasury acted boldly in finally confronting the problems at FNMA and Freddie Mac. But there is a sense of hopelessness that the crisis has acquired its own internal self propulsion, an inertia, which keeps it rolling in spite of all attempts to restrain it. That motion, unchecked, seems destined to end in some deafening crack up.

Wild swings in the market are a hallmark of bear markets, but with Lehman and Washington Mutual, GM and Ford, and God-knows-who-else (well, the FDIC itself) soon to be in need of a massive injection from the Treasury, as well, it doesn't take a genius to recognize that we are sailing in dire straits, on a ship whose sails have already been shredded by the economic storm.

So what? I may well have asked myself that question not too many years ago. And indeed, it may seem jarring for long-time readers to see this blog turn from a focus on politics to a focus on economics -- there are days when it surprises myself.

So why write about it? Despite the rhetoric coming from both sides about the "historic" nature of this election, it seems to me that the real history taking place right now is being spelled out in the once-arcane alphabet (for me) of the marketplace. Something massive is afoot, a reordering of the world that goes far beyond the who's up and who's down battle between the shorts and the longs on Wall Street. The ramifications of that reordering can be heard in the cries of "Drill Baby Drill" and seen in the soaring cost of food and in the steady drip-drip-drip of dramatic Friday night announcements from the Fed, announcing the heretofore-unheard-of bail out of this big entity or that. And it seems to me that understanding the world requires at least some effort to understand what all those things mean.

Whether or not anyone can divine the meaning of these things remains to be seen. But it sure it interesting to point out the signs, whenever they appear. And they seem to be appearing almost daily.

(Is there any way to talk about the economy these days without sounding apocalyptic?)