Wolves of Wall Street Sink Us…Again

By Shlomo Maital

   OK – they’ve done it again. The Wolves of Wall Street have again brought the world’s financial markets to the edge of the precipice.

    How?   They borrowed low (in Japan, where interest rates are near zero) and invested high (US, where the Fed has been conservative in deeping rates high). 

     Pretty simple.  Pretty profitable.  And…kind of risky.  Because Japan is experiencing inflation – and it was pretty clear the Japanese Central Bank was going to crack down – Japan hates inflation, and deals with it aggressively.  So – there is a double whammy.  A surprising rate hike in Japan, making credit costly – and in the US,  a surprising monthly data showing labor market weakness. Japan’s stock market fell by 12 % in a day or two — a very steep and destabilizing drop.

        This has led the wolves to seek to cut their losses, extricate themselves from costly credit in Japan, and a sell-off ensues in world capital markets. 

         It is not the first time. Nor the last.  Hopefully damage control will limit the harm done to us ordinary citizens, who mostly watch and wait and cluck our tongues at what the Wall St. Wolves are up to.  And – apologies to the real wolves – they only kill to eat, not to buy yachts.