Much about the last 10 days has felt like the 2008 global financial crisis. But there are crucial differences that lower the risk this episode will have the same seismic impact on the world economy.
like the 2008 global financial crisis. But there are crucial differences that lower the risk this episode will have the same seismic impact on the world economy as 15 years ago.There's no doubt that the still-unfolding banking panic has raised the odds of a recession. But when you scrutinize the details of what is happening, there is less reason to think this will become a sprawling mega-crisis.It helps to start with an explanation of the root cause of the two crises.
This time around, the root problem isn't bad loans. Rather, the Fed's rapid tightening has created paper losses for banks that made loans or bought long-term bonds when rates were much lower. Lehman Brothers and Bear Stearns fit those molds. AIG was an insurance company. Regulators had limited visibility into the massive market for asset-backed securities.
And regulators have more authority to resolve even a large failed bank, which should prevent a chaotic situation like what followed the Lehman Brothers bankruptcy.and perhaps most importantly, the problems now should have less risk of feeding on themselves in the kind of vicious cycle that makes financial crises so damaging.
France Dernières Nouvelles, France Actualités
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