Credit continues to dry up globally, posing deeper risks to growth. Markets are clearly responding, with breathtaking declines causing a panic that is feeding on itself now. Investors are locking in their losses. The Federal Reserve is looking for new and more innovative ways to print money short of dropping it from helicopters. It is now paying banks interest on their reserves and considering making unsecured loans to try to prop up the market for commercial paper. The danger now is that even solvent, profitable companies that cannot get refinancing could start defaulting on debt, forcing them into fire sales or bankruptcy. Moreover, a wave of losses and forced sales in the hedge fund industry could batter the holdings of the big pension funds and sovereign wealth funds that hire them. If you already own dollars and gold, it may be time to stock up on bottled water and bullets.
warnold@thenational.ae