Speaking 10 years after the Global Financial Crisis of 2008, Hank Paulson worried that, while banks were not over-leveraged, governments had no room to stimulate growth because they were already spending and borrowing record at record rates and interest rates couldn't go any lower. Another 5 years on, and the era of cheap money is over, inflation has rocketed and suddenly there's a crisis of confidence in banks, not governments. What the hell happened? Well, it's the same old problem: greed and stupidity are winning, but this time it's everywhere, all at once.
The result is a broader crisis in confidence - or the lack of it. No matter where investors turn unexpected holes are appearing. A string of crypto collapses culminating in the discovery of a vast fraud in FTX and the ensuing crypto-contagion that bled into the banking system via Silvergate; the SEC finally calling time on numerous unregistered crypto-securities programmes, again stressing real world investors and funding providers; the Truss-Kwarteng 'mini-budget' producing unaffordable mortgages and declining property prices amid flat-lining business investment and other trade problems in Brexit Britain, now the basket-case of the G7; Russia's invasion of Ukraine driving energy price explosion and rampant inflation, to which central banks have responded with rapid interest rate rises that in turn cut the market value of long term bonds held by banks with needy depositors, like SVB, First Republic and other lesser US banks that Trump exempted from proper scrutiny. And then there's the perennial doom-spiral that is Credit Suisse.
Where will it end?
Who knows. Buckle up and try to enjoy the ride.
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