Those actions over more than a decade left banks with few practical alternatives but to invest customers’ short-term deposits in longer-term instruments whose rates of return would inevitably become anemic as interest rates rose. Like the 2008 crisis, today’s problems are the result of a complicated mixture of executives willing to take risks in an economic environment bludgeoned by governmental irresponsibility and distorted by out-of-date regulation. The causes of financial panics can’t be packaged into pithy tweets or catchy political slogans. This current crisis was baked into the system when governments convinced themselves they could print money to spend their way out of problems, and because global central banks kept interest rates unusually low, traversing between strangely labelled economic theories such as “anti-fragmentation,” “quantitative easing” and “quantitative tightening.” The fragility built into the system enlarges credit availability and allows the economy to grow and prosper - until risk becomes overwhelming and everyone looks for refuge.
banking system is designed to absorb and lever financial risk. The better question is, why did it take so long given the massive missteps that have occurred? While markets step back from the edge anticipating additional financial shoes to drop throughout the economy, you may be wondering how this could have happened so soon after financial systems were inoculated against such things after the 2008 global crisis.
The clouds hanging over financial markets were inevitable, but they were also preventable.
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