Economic Upheaval

The world’s politicians are now running full tilt to get ahead of the markets. So far, the markets are winning, plunging in what to all appearances is a death spiral. Share prices fall, making it nearly impossible for the banks to raise new capital; house prices fall, reducing the value of the mortgage-backed securities on bank balance sheets; governments offer to help by buying preference shares in the banks, but the claims these shares would have on future earnings spook common shareholders, and prices fall further.