A Year After Lehman
Although the real savagery in equity and credit markets did not begin until late September and into October of 2008, the decision by the U.S. Treasury to let Lehman fail on September 15th was the catalyst for…
The vicious circle of forced asset sales, depressed lending collateral values, lower credit availability, imploding consumer and business confidence and collapsing global trade that deepened the recession and threatened to topple the financial system itself.
A year later, the SP500 from -46% to -15% pre Lehman levels; the dollar at 1.47 vs the Euro; 91.29 Yen; Crude 72.04; Gold 1007.60; Bank of England rate from 5% to 0.5%; ECB from 4.25% to 1%.
Meanwhile, from Sept 07 Fed Funds went from 5.25% to ZERO.
Household debt fell for the fourth consecutive quarter, and will no doubt continue to contract as debt is paid down and foreclosures continue to rise.
Credit is still tight, consumer and small business confidence surveys are extremely weak, income is still contracting and the housing market is not yet in the clear.
It therefore remains to be seen what kind of economic growth pace will prove sustainable.
In addition, an abundance of reserves supplied by the Fed is waiting to become inflationary tinder.
Investor risk appetites would no doubt be undermined were the dollar decline to become disorderly or if commodity prices or bond yields were to rise further materially.
The vicious circle of forced asset sales, depressed lending collateral values, lower credit availability, imploding consumer and business confidence and collapsing global trade that deepened the recession and threatened to topple the financial system itself.
A year later, the SP500 from -46% to -15% pre Lehman levels; the dollar at 1.47 vs the Euro; 91.29 Yen; Crude 72.04; Gold 1007.60; Bank of England rate from 5% to 0.5%; ECB from 4.25% to 1%.
Meanwhile, from Sept 07 Fed Funds went from 5.25% to ZERO.
Household debt fell for the fourth consecutive quarter, and will no doubt continue to contract as debt is paid down and foreclosures continue to rise.
Credit is still tight, consumer and small business confidence surveys are extremely weak, income is still contracting and the housing market is not yet in the clear.
It therefore remains to be seen what kind of economic growth pace will prove sustainable.
In addition, an abundance of reserves supplied by the Fed is waiting to become inflationary tinder.
Investor risk appetites would no doubt be undermined were the dollar decline to become disorderly or if commodity prices or bond yields were to rise further materially.
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