There are two ways to look at the recent statements by US Federal Reserve chairman Ben Bernanke and US president George Bush on the continuing credit crunch in the global market. Bernanke gave a speech on Friday where he spoke at length about the turmoil in the markets, but did not mention the threat of rising inflation even once. Many believe that Bernanke was preparinghis audience for an interest rate cut on 18 September, when a decision is due.
Meanwhile, Bush has said that his government would help those who are finding it difficult to service their mortgages, so that people do not lose their houses as a result of loan foreclosures.
This is the sort of news that is likely to cheer the stock markets, both here and elsewhere. These two statements show that the US is ready to ride to the rescue. But there is another possible response: that the problems in the US housing and global credit markets are far worse than expected.