According to financial analyst Mauro Bottarelli, the financial markets’ lack of excitement after Federal Reserve Chairman Jerome Powell’s announcement of a rate cut at the Jackson Hole, Wyoming bankers’ extravaganza, is due to similarities with the situation in 2007. This is not only because the Fed cut will probably be announced at the Federal Open Market Committee meeting on Sept. 17-18, exactly the same day as 17 years ago, when the Fed implemented an emergency 50-point cut.
The similarity with 2007 is that that rate cut followed precursors of what, one year later, became the global financial crisis: Bear Stearns and the two Paribas funds. This time, we have had even more precursors of a meltdown: Credit Suisse, the British pension funds, the U.S. community banks, the iconic Silicon Valley Bank, the yen-dollar carry trade.
The difference is that in 2007 the “markets” reacted euphorically, pushing a rally that lasted until July 2008 and covered the approaching iceberg ("the last hurrah before the crash"), while this time they possibly drew a lesson from 2007 and reacted lukewarmly.
“We are practically in the same condition as in 2007. In fact, worse. Because compared to then, market leverage is enormously larger and less manageable. And, most importantly, global private and public debt is now largely out of control.”
Sound familiar? You read it first in EIR.
