Today the market improved to make up for most of the losses yesterday. But one point hasn’t really been said (I updated this post the following day and here’s a link to the main story in the New York Times - Stocks Surge as U.S. Acts to Shore Up Money Funds and Limits Short Selling).

I believe, and I am not alone, the financial markets are so weakened, by the sub prime mortgage meltdown and a lack of liquidity, the markets can not function without massive governent and international assistance.

Paul Krugman puts the situation in perspective in a OPED on Crisis Endgame

” ..The story so far: the real shock after the feds failed to bail out Lehman Brothers wasn’t the plunge in the Dow, it was the reaction of the credit markets. Basically, lenders went on strike: U.S. government debt, which is still perceived as the safest of all investments — if the government goes bust, what is anything else worth? — was snapped up even though it paid essentially nothing, while would-be private borrowers were frozen out.

Thus, banks are normally able to borrow from each other at rates just slightly above the interest rate on U.S. Treasury bills. But Thursday morning, the average interest rate on three-month interbank borrowing was 3.2 percent, while the interest rate on the corresponding Treasuries was 0.05 percent. No, that’s not a misprint.

This flight to safety has cut off credit to many businesses, including major players in the financial industry — and that, in turn, is setting us up for more big failures and further panic. It’s also depressing business spending, a bad thing as signs gather that the economic slump is deepening.”

I hear some politicians still claiming that the fundamentals of the market are strong. Even Congress was in the dark as to how bad things have become (see Congressional Leaders Were Stunned by Warnings)

Were the line about the Fundamentals of the Economy being strong really true, the FED would not have reversed itself and lent AIG 85 Billion dollars on Tuesday.

Also, the FED and other international central banks would not have needed to inject over 180 Billion Dollars in the world markets today.

One of the fundamental problems Republicans are running into is the belief the Free Market System can police itself is clearly wrong.

Bush is largly absent and staying out of the debate as much as he can, but it’s clear the policies that led to this massive financial failure are tied directly back to him, that’s why he has so little to say.

After all, what can he say? The fundamentals of the market are strong?

I think Bush’s handlers are having him host a visiting dignitary today. It’s said the dignitary praised Bush for surviving all the crisises of his administration, from 9/11 till the Wall Street Crash. I suppose that’s one way to look at it.

Another way to look at the last 8 years, is that G.W. Bush, and his Republician Party, were instramental in creating and prolonging almost every crisis we’ve had side he took office, and yet he managed to get re elected and survive in office for all those 8 years.

Yes, I think the glass is half fill or half empty depending ok what your point of view is.