A "rollercoaster ride" is one description for these days of scary ups and
downs in financial markets. If you want to use a more technical term, the
markets are showing volatility.
Thursday was another example of a day of strong gains on the New York Stock
Exchange after a day of heavy losses.
Major measures of United States markets have closed with their biggest
one-day losses since the financial crisis of two thousand eight. Asia and Europe
have also had sharp declines.
Volatile markets can react suddenly in wild and unpredictable ways. Usually
some kind of shock, or more than one, is involved.
For example, last Friday, one of the three major credit rating agencies
downgraded long-term United States government debt. Standard & Poor’s lowered
its opinion of Treasury securities one step from the highest rating, triple-A,
But shocks like a hopeful jobs report or good earnings results can stop a
fall and send prices higher. Also, when prices fall, investors may find good
deals and start buying.
The United States held S&P's top rating for seventy years and never had a
downgrade. But many investors were expecting that to happen even after the
budget deal in Washington. Congress last week agreed to increase the
government's borrowing limit in return for steps to cut spending and reduce the
S&P says it thinks America's debt will only increase in the future. President
BARACK OBAMA: "The fact is, we didn't need a rating agency to tell us that we
need a balanced, long-term approach to deficit reduction. That was true last
week, that was true last year, that was true the day I took office."
He said this week that markets still consider United States credit "as among
the world’s safest."
Still, there are growing worries of another recession -- a double dip. On
Tuesday, policy makers at the central bank said economic growth so far this year
has been "considerably slower" than they had expected. The Federal Reserve said
it would likely keep short-term interest rates near zero for at least two more
Borrowing costs for the United States remain very low. But debt worries in
two of Europe's biggest economies have increased costs for their governments in
On Monday the European Central Bank began buying debt securities from Spain
and Italy. These efforts have helped push down interest rates for those
countries. Nick Parsons, an economist with the National Australia Bank, says
the bank made the right move.
NICK PARSONS: "It has been an absolutely critical decision."
But he also thinks the bank will have to buy more. And Europe must still deal
with the rescues of Greece, Ireland and Portugal.
And that's the VOA Special English Economics Report. I'm Mario Ritter.