Another tumultuous week and drama. When last Wednesday Wall Street got wracked before the $700 billion plus rescue package I thought we hit bottom. But as events unfold, we may see more drama to come.

Keeping a calm today is difficult since I'm an economist. It's difficult to see that some put the our economy on the line for some presumed political gains. And while we're waiting for the bail out plan to eventually pass- Bush's plan or another - our economic system is falling apart. WaMu today. Who's next? How long are we gaing to wait? I hope we do it before it's too late.

The problem is that the more we wait the more consumer confidence dips. Considering that domestic spending is responsible for 34/ of GDP growth, it's easy to imagine the immense impact of spending on economic activity.

Another factor to keep in mind is the need for credit. We all know that our economy is based on credit. Now I come up with an easy to follow through example for you and politicians to understand this.

Consider this: average Joe goes out to buy a home for $200,000. He won't have $200K in cash to do it - just put down 10%-20% and he's ready to move in. The beauty is that by saving $20K average Joe can hand over $200K to the home builder. In other words we inject $200K into our economy by saving up only 10% of it in hopes that this fellow will live up to his promise and make orderly payments for the next 30 years. This $200K then pays for all materials, labor, plus leaves a profit at the builder's pocket. So he can go and spend it. And at current interest rates and taxes, average Joe will pay ~$2,000 a month for all this.

Let's just assume we let Wall Street fall. Easy credit will disappear. It will mean that for a $180K loan average Joe will have to pay not $2K a month but $4K. Can he afford it? Not average Joe. So he won't buy this house. Only when prices will come down to his income level - that is $2K a month. So the price of the house will come down to $100,000 so average Joe can afford to buy it. By doing so we have entered into a recession when home values fall, folks cut back on spending, further escalating the downward spiral.

We know that no economic cycle lasts forever. So eventually home prices will bottom out and increase, this is when consumer's confidence will increase and will step up spending. But it may be well 2-5 years or more before this happens.

So my question is: is it worth letting Wall Street fall dragging the whole economy with it? I rather see my home value to increase sooner than later and won't accept this doom scenario. Let the bail out package to pass ASAP and leave this nightmare behind us now.

China ADR Index

So far Wall Street is on hold. Volume disappeared waiting for the drama to unfold. Chinese ADRs are trading seesaw and I rather don't make an attempt to give future direction of stocks when we're in such a limbo about Wall Street. Let's just wait until we know where we're heading.

Top 10 - Bottom 10 - China ADR			26-Sep-08	1:41pm
Name	Symbol	Price	Change	Change%
HSBC HLDGS PLC AD	HBC	$83.75	$2.16	2.65%
THE9 LIMITED	NCTY	$18.63	$0.59	3.27%
GUANGSHEN RAIL CO	GSH	$24.52	$0.31	1.28%
AMERICAN ORIENTL	AOB	$7.03	$0.18	2.63%
CHINA LIFE INS CO	LFC	$58.27	$0.15	0.26%
TOMOTHERAPY INC	TOMO	$4.92	$0.14	2.93%
CITY TELECOM(HK)	CTEL	$3.22	$0.07	2.22%
LINKTONE LTD.	LTON	$1.49	$0.05	3.29%
CHINA SOUTH AIR L	ZNH	$9.97	$0.04	0.40%
QIAO XING UNIV TE	XING	$2.69	$0.03	1.13%
JA SOLAR HOLDINGS	JASO	$12.38	-$1.74	-12.33%
SHANDA INTERACTIV	SNDA	$28.29	-$1.82	-6.04%
LDK SOLAR CO ADR	LDK	$35.97	-$1.83	-4.84%
CTRIP.COM INTL LT	CTRP	$39.88	-$2.27	-5.39%
PETROCHINA CO ADS	PTR	$111.24	-$2.28	-2.01%
SOHU.COM INC	SOHU	$59.17	-$3.23	-5.18%
CHINA PETRO & CHE	SNP	$83.67	-$3.56	-4.08%
SUNTECH POWER HLD	STP	$38.84	-$4.34	-10.05%
CNOOC LTD ADS	CEO	$125.57	-$4.67	-3.59%
BAIDU.COM	BIDU	$261.02	-$14.48	-5.26%