The financial system could face a meltdown of 1929 proportions unless US politicians succeed in their efforts for a $700bn rescue scheme, experts added.
The warning came as Republicans and Democrats met in Washington for a rare weekend debating session to attempt to seal agreement on the contentious plan, aimed at preventing a long-lasting recession in the US.
Officials close to Paulson are privately painting a far bleaker portrait of the fragility of the global economy than that advanced by President George W Bush in his televised address last week.
One Republican said that the message from government officials is that “the economy is dropping into the john.” He added: “We could see falls of 3,000 or 4,000 points on the Dow [the New York market that currently trades at around 11,000]. That could happen in just a couple of days.
“What’s being put around behind the scenes is that we’re looking at 1930s stuff. We’re looking at catastrophe, huge, amazing catastrophe. Everybody is extraordinarily scared. It’s going to be really, really nasty.”
Emphasis added by me.
What have I been screaming for the past nine-plus months, goddammit?!
London investors have warned that the FTSE could suffer falls of as much as 1,000 points - a fifth of its value, if the deal falls through.
Peter Spencer, economic adviser to the Ernst & Young Item Club, said: “This is the time you have to bail people out and ask questions later. It is very difficult to see how the US banking system would survive without that. This has the potential to make 1929 look like a walk in the park.”
Emphasis added by me.
Oh, there will be people will will now laugh their asses off because I will cite a TV series, but all this week a line from the first episode of Space:1999 has been running through my head:
Now we're sitting on the biggest bomb man's ever made.
And looking at the script, there's a line for those fifty-eight percent who doubt any consequences:
You don't seem to understand. We're sitting on top of it, there is no chance.
We will all of us find out soon enough.
All Chronicles of Depression 2.0 posts. Your final weekend to read.