Pollyannaism has been rampant since the financial world first began to unravel more than a year ago.
First there was the asinine belief -- espoused by central bankers and Wall Street "strategists" alike -- that the problems in the subprime credit market would remain "contained." Wrong.
Then TV pundits, ivory tower economists, equity traders and other clueless observers asserted that the government -- the Fed through monetary policy, and legislators by way of fiscal policy -- would somehow manage to save the day. Wrong again.
And finally, the "experts" started arguing that even if things went sour in the U.S., the rest of the world would still manage to keep on truckin', thus muting the impact of any falloff in demand in the world's largest economy. Wrong once more.
In reality, the dominoes have fallen more-or-less as anticipated by those who actually looked at the facts and honestly assessed what they meant before the meltdown started. For this group -- and yes, I include myself -- the developments detailed in the following Reuters report, "Global Credit Crisis Undermining Economy," are not a surprise.
The global credit crisis is continuing to undermine the world economy, putting the squeeze on Japanese exports, unravelling European business confidence and deepening the U.S. housing slump.
Economic data from the United States on Thursday showed the housing market remained weaker than Wall Street's already grim estimations, with existing-home sales tumbling to a 10-year low.
In Europe, key measures of business activity and company sentiment fell more than expected in Germany, France and Italy, as well as in a survey of the 15-nation euro zone.
The Ifo institute's gauge of German business sentiment, based on a survey of about 7,000 companies, suffered its biggest drop since soon after the September 11 attacks on the United States in 2001.
Japanese exports, which are heavily dependent on U.S. demand, shrank in June for the first time in nearly five years and Bank of Japan policy-maker Atsushi Mizuno, said there was a chance that Japan could slip into a recession although he did not expect a deep one.
Thursday's data was also the latest reminder that the malaise in the world's largest economy originated in the U.S. housing market, and the rising inventory of homes for sale does not bode well for the prospects of economic recovery.
"This is not something we are going to snap out of quickly," said Richard Sparks, senior equities analyst at Schaeffer's Investment Research in Cincinnati.
U.S. and European stocks fell. The U.S.
