If you want to point fingers, start with statism
After two weeks of panic, fear and something called “pure fear,” global stock markets rebounded Tuesday and settled down. Exactly why is anybody’s guess. Maybe investors, whoever and wherever they are, just exhausted their supply of fear and decided to engage in a little exuberance, global debt crises be damned, while they restocked fear for another day.
When markets go down rapidly, investors are caricatured as lunatics driven by dark forces. When markets go up, the same investors are often portrayed as rational responders to allegedly sound policy from some government agency or to some new upbeat if obscure statistic.
The best that can be said for Tuesday’s market rebound in New York (4%) and Toronto (3.8%) is that investors did not find any fresh horror in the latest pronouncements from the U.S. Federal Reserve. The market already knew what the Fed would say: The state of the U.S. economy is much worse than the Fed’s giant forecasting machine had predicted. As a result, the world’s greatest central bank will now hold interest rates at about zero through to the middle of 2013.