Father Christmas, fairies and the financial markets

Do you believe in Father Christmas and fairies? I hope you do because those belief should last longer than a belief in the financial markets.

Lehman Brothers has filed for bankruptcy and is suspended from trading around the world, Merrill Lynch is sold to Bank of America (in an all stock deal), and the reason Freddie Mac and Fannie Mae were so quickly rescued is because the foreign funds that have been buying their paper decided to dump it for something of value (at this stage almost anything is worth more than a USD mortgaged backed security).

So what do the markets do. Stock markets wobble and sit about 2% down at midday in New York, Gold moves up 2% (while Zinc rises 5%) and believe it or not the American Peso (still know rather quaintly as the US dollar) actually strengthens once the Asians (who have a better handle on these things it seems that the Europeans and the Americans) are out of the market for the day.

If nothing else tells you that the markets are dubious reflectors of reality at best then surely the fall in gold over the last months while the US slides towards its doom, dragging Europe with it, should remind us of the increasingly bizarre and illusory nature of the world we live in.

It will be really interesting to see how long the financial elite can keep the illusion up before the whole pack of cards comes crashing down.