By John Kell and Alan Murray
August 24, 2015

It’s Black Monday in China – that’s the term used this morning by China’s official state news agency, which usually downplays bad news. The Shanghai index fell another 9%, pushing stocks, currencies and commodities down around the world. U.S. stock futures point to a bad day as well.

The market rout means it is increasingly unlikely the Fed will raise interest rates next month. Former Treasury Secretary Larry Summers – who was Janet Yellen’s competition for the Fed job – writes in the Financial Times this morning that raising rates now would be exactly the wrong thing to do:

“There may have been a financial stability case for raising rates six or nine months ago, as low interest rates were encouraging investors to take more risks and businesses to borrow money and engage in financial engineering … That debate is now moot. With credit becoming more expensive, the outlook for the Chinese economy clouded at best, emerging markets submerging, the US stock market in a correction, widespread concerns about liquidity, and expected volatility having increased at a near-record rate, markets are themselves dampening any euphoria. The Fed does not have to do the job. At this moment of fragility, raising rates risks tipping some of the financial system into crisis, with unpredictable and dangerous results.”

 

A fine mess. Make the most of the day.

 

Alan Murray
@alansmurray
alan.murray@fortune.com

SPONSORED FINANCIAL CONTENT

You May Like