In the worst Christmas Eve drop in the history of the US stock market, the DOW, falling 653 points, sent shockwaves through world markets even as financial experts noted the strange and confusing comments of US Secretary of the Treasury Steve Mnuchin.
Many noted that Mnuchin’s message — sent from Cabo San Lucas, Mexico, where he and his family are enjoying their holiday vacation — possibly intended to assuage fears of a crash, acted more as a slap to an already jittery stock market.
Mnuchin, whose branch of the government is affected by the current shutdown, tweeted that he had been in touch with six big US finance firms, including J.P. Morgan Chase, Bank of America, Goldman Sachs, Morgan Stanley, Wells Fargo and Citigroup, according to ABC News.
According to the Treasury Secretary’s tweet, the six bank executives assured him that “they have ample liquidity available for lending to consumer, business markets, and all other market operations,” cited by the BBC. How an Economy Grows a... Best Price: $1.56 Buy New $2.99 (as of 12:25 EDT - Details)
“[the six banks] have not experienced any clearance or margin issues and […] the markets continue to function properly,” Mnuchin — an appointee of US President Donald Trump — added.
As noted by global financial experts, however, no one had previously expressed any doubt about overall liquidity.
Possibly intended to calm investors, economists and traders, Mnuchin’s comments appear to have resulted in the opposite effect: promulgating a tidal wave of stock dumping as markets leap to unfounded conclusions based on the Treasury secretary’s strange tweet, according to a report from CNBC.
“I […] thought it was April Fools,” observed former US Vice President Joe Biden’s chief economist Jared Bernstein, cited by the Washington Post.
“Markets are already nervous enough. It’s like sending out a message saying our space shields can intercept incoming asteroids. Uh, I didn’t know there were any coming our way,” he added.
Those directly involved have vocally refuted Mnuchin’s inflammatory comments which, combined with the current state of chaos in the White House, are seen as a threat to the stability that they originally sought to assuage, according to ABC News. The Great Deformation:... Best Price: $3.08 Buy New $24.75 (as of 02:50 EDT - Details)
“My guess is that Mnuchin was under pressure from Trump to ‘do something’ and this half-baked attempt to calm markets is the result,” noted University of Oregon economics professor Timothy Duy, cited by ABC News.
“Mnuchin apparently thought […] that easing fears of a financial crisis could help the stock market. But that is not a serious fear at this point,” Duy stated.
“Mnuchin raised a fear that really isn’t a current issue,” Duy — author of the influential Fed Watch blog — pointed out, adding, “By doing so [Mnuchin] creates the perception that he knows of a problem that no one else knows about.”
“That kind of thing can precipitate a financial crisis because, fearing the unknown, market participants stop buying anything and financial institutions stop lending to each other.”
US markets are closed on Christmas Day but will reopen December 26.
Reprinted from Sputnik News.