Another chaotic week for banks marks the end of an era for the global economy

Bloomberg/John Authers and Isabella Lee/3-17-2023

“In the end, it may be convenient to pin the blame of the recent financial turmoil on several banks, when in reality what the fallout of these institutions revealed are the large cracks hammered in large part by the Fed itself. As central banks globally launched their aggressive rate-hiking campaigns, markets on both sides of the Atlantic have simply become the collateral damage. And if traders think policymakers will pause, they may be mistaken.”

USAGOLD note: The problem is systemic, hence costly, widespread, and probably enduring…… Authers and Lee explore the Fed’s options and what they might mean for markets in considerable detail. If the Fed decides to continue raising rates while unleashing massive liquidity to rescue the banking system, one cannot help but conclude that the inflation it fights with one set of policies, it creates with another – a hawk and a dove at the same time.