Bailouts are the New Black

The Financial Times describes today’s rash of international bailouts:

Leaders of the 15 eurozone countries agreed to a plan that will guarantee loans between banks through 2009 and allow governments to buy stock in distressed financial companies.

Australia guaranteed wholesale funding for banks. Britain said it would inject as much as $63 billion into three banks; Germany made its own announcement of a $107 billion recapitalization plan. The ECB, the Bank of England and the Swiss National Bank announced they would lend unlimited amounts of dollars to banks.

…no chancellor writing cheques will get off lightly. A recent International Monetary Fund study of 124 historic banking crises shows that they cost, on average, 13 per cent of gross domestic product, once the full effects of fiscal drag are included.

Amazing how countries can move in sync when faced with imminent communal collapse.

The Dow rallied 500+ points upon the news that the global credit system hasn’t been cryogenically frozen, after all. Oil speculators were happy, too, contributing to a $77 jump in oil futures.

Not surprisingly, the Global Volatility Index is down more than 11%.

The markets are acting like we’re saved.
We’re not. This is just the beginning. The Eurozone collaboration revived a global economy on its way back to the Ice Age. That doesn’t mean we’re back in the black, not by a long shot.

Global markets’ moves today don’t reflect the real state of the economy. Instead, they mirror how badly all of us need a shot of hope.