WORLD HISTORY: IRRATIONAL EXUBERANCE - NEW YORK

MEGA MERGERS, CORPORATE DOWNSIZING, STOCK MARKET RECORD HIGHS, AND THE RISK OF GLOBAL RECESSION
18-MAR-07 AND 30-MAY-07

18-Mar-07: Irrational Exuberance Peaked at 38.1%. After cresting:

The exuberance remained oblivious to the subprime mortgage meltdown and the Virginia Tech massacre.
The Federal Open Market Committee (FOMC), the European Central Bank (ECB), the Bank of England (BOE), and the Bank of Japan (BOJ) all decided to keep their rates constant.¹
The Dow Jones Industrial Average (DJIA) soared to a record 12,961.98 on 20-Apr-07, then to another record 13,089.89 on 25-Apr-07.²
Acquisitive corporations targeted Sallie Mae, Reuters, ABN AMRO, and A.G. Edwards.
Motorola and Dell decided to downsize.

28-May-07: Irrational Exuberance Peaked again at 14.8%.

29-May-07: China's Ministry of Public Security warned investors against scams and illegal activities in the stock market.³

30-May-07: China increased the stamp tax on securities trading to cool the economy.⁴

China's market indexes tumbled: The Shanghai Composite Index (SSE) fell 281.84 points to 4,053.09, and the Hang Seng Index (HIS) fell 175.83 points to 20,293.76;⁵ but

The Dow Jones Industrial Average (DJIA) soared 111.74 points to 13,633.08;⁶ and

The S&P 500 index closed at 1,530.23 – an all-time high.⁷

Ironically, on 30-May-07, Rob Vos, Director of the Development Policy and Analysis Division of the UN Department of Economic and Social Affairs (DESA), launched the midyear update of the 2007 World Economic Situation and Prospects report with a warning about the risk of a global recession: a serious recession in the U.S. can "significantly slow the world economy and transmit the recession into the rest of the world."^8-9

¹ FOMC, 21-Mar-07 and 9-May-07; BOE, 5-Apr-07; ECB, 10-May-07; and BOJ, 17-May-07.

² Dow Jones & Co., 20-Apr-07 and 25-Apr-07.

³ China View-Xinhua, 29-May-07

⁴ China View-Xinhua, 30-May-07.

⁵ Yahoo! Finance, 30-May-07.

⁶ Dow Jones & Co., 30-May-07.

⁷ Standard & Poor's, 30-May-07.

⁸ "Dollar Crash Must Be Averted to Sustain Global Economic Growth," UN News, 30-May-07.

⁹ For Edward E. Ayoub's theory of the business cycle, see World War III Against the Money Trust? Book II: The Dark Side of the Business Cycle. Toronto, ON: Macroknow Inc., 1998, 2007, http://brandnewlaw.com.

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