News at 11: US government buys up liquidity abroad, exporting the banking crisis to other countries and bringing the stock markets down.
The 700bn bailout money has to come from somewhere: It is 700bn less that would partly be in the stock markets of the world. Also when the US issues additional bonds, a lower price means a higher return, and that is what investors are asking for when suddenly 700bn worth of bonds are issued.
Even if these bonds have not all been issued yet, the markets think ahead and expect lower prices. So it is not a surprise the stock markets go down when the governments start their rescue plans.
As a result of the bail out, the banks as beneficaries should recover on the stockmarkets while the rest of the economy slows down.
There is also the question that alternatives have not been considered, for example instead of buying the poisoned subprime loans at the benefit of the banks, house buyers could have been the benificaries, bringing housing prices up so that the loans and mortgages are worth something again.