http://www.bloomberg.com/…

Oct. 10 (Bloomberg) — Italian Prime Minister Silvio Berlusconi said political leaders are discussing the idea of closing the world’s financial markets while they “rewrite the rules of international finance.”

“The idea of suspending the markets for the time it takes to rewrite the rules is being discussed,” Berlusconi said today after a Cabinet meeting in Naples, Italy. A solution to the financial crisis “can’t just be for one country, or even just for Europe, but global.”

The Dow Jones Industrial Average fell as much 8.1 percent in early trading and pared most of those losses after Berlusconi’s remarks. The Dow was down 0.5 percent to 8540.52 at 10:10 in New York.

Group of Seven finance ministers and central bankers are meeting in Washington today, and will stay in town for the International Monetary Fund and World Bank meetings this weekend. European Union leaders may gather in Paris on Oct. 12, three days before a scheduled summit in Brussels, Berlusconi said today, while Group of Eight leaders may hold a meeting on the crisis “in coming days,” he said.

Berlusconi didn’t give any details about what kind of rules leaders were looking to change, except to say that leaders are “talking about a new Bretton Woods.”

The Bretton Woods Agreements were adopted to rebuild the international economic system after World War II in a hotel in Bretton Woods, New Hampshire. The aim of the agreements was to establish a monetary management system, initially by pegging currencies to gold. The IMF was set up later to help manage the international financial system.

A market holiday is bad enough… but a new monetary system is huge. The UK was king prior to WWII. Since it’s been the USA. Will the dollar continue to rule? Just about every currency is having problems. I’m really at a loss for what they would change. Perhaps an international currency?

The Data Don’t Justify Financial-Market Panic by Robert Higgs

As the hysteria has grown in the discussion of financial markets and related government policies, I have been puzzled by the discrepancy between the best available data and the descriptions quoted in the press – statements by financial gurus, traders, and professors, as well as by government officials. To hear these spokesmen tell the story, you’d think that the world will soon go to hell in a hand basket, if it hasn’t gone there already. Yet every time I look for data to check these claims, I find nothing solid to back them up. …

Consider first the interest rates for commercial paper. For the past several weeks, 30-day nonfinancial paper has been going for about 2 percent; 60-day and 90-day loans in this market have required a slightly greater rate of interest. Financial commercial paper has been going for roughly 3 percent, give or take a few tenths of a point, with little difference among the 30-day, 60-day, and 90-day rates.

Given that the rate of inflation at present is greater than 3 percent, and presumably will remain greater than 3 percent for the next three months, these nominal interest rates on commercial paper imply that lenders are actually giving away money to corporations that sell commercial paper – the nominal rates of interest are less than the expected rate of inflation. Is this situation what one expects to see during a “credit crunch”? Hardly.

Many commentators claim, however, that virtually no transactions are occurring in this market. These claims are completely false. For the week that ended October 1, which is the most recent week currently reported, total commercial paper outstanding amounted to $1,607 billion. Yes, this amount was down from the $1,702 billion reported for the previous week, but is a 5.6 percent drop a good reason to panic? If we go back to March 2008, when nobody was talking excitedly about the commercial market’s “freezing up,” we find that the total amount outstanding, on average, was $1,822 billion, or only 13 percent more than last week. In March, the market was working fine; now it’s “locked up.” This sort of hyperbole, with which we are being bombarded hourly around the clock, is totally without a basis in the facts.

For the year 2006, when the financial markets were, for the most part, still ripping along very nicely, the total amount of commercial paper outstanding, on average, was $1,983 billion; for 2007, it was $1,781 billion. For the past seven months, on average of the monthly data, it was $1,743 billion.

Either someone is deliberately trying to spook us, or these panic-mongers have simply lost their grip on reality. Officials at the Fed and the U.S. Treasury are running around like chickens with their heads cut off. They are dragging the world’s leading central bankers and finance ministers around with them. The news media are raving like lunatics. The big unanswered question is: WHY?

I’ve been suspecting the same. I’d seen numbers here and there that didn’t seem to add up. I’m sure there are components missing to this analysis… but what?