YahooFinance-Bloomberg/Ye Xie, Isabelle Lee, Amelia Pollard and Peyton Forte/6-13-2022
“’Liquidity in the market is worse than it was leading up to Lehman,’ said [Thornburg Investment’s Christian] Hoffmann, who worked at the firm that imploded back then, triggering the worst financial crisis since the Great Depression. It’s the kind of problem that can exacerbate losses in a big way. ‘That creates even more risk, because if the market doesn’t have liquidity, it can gap down very quickly.’”
USAGOLD note: Whether Monday’s market was the foreshock or the full earthquake remains to be seen. Said one perplexed analyst: “People are trying to process what’s behind these large moves. We don’t know for sure.”
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“Things weren’t supposed to unfold this way. The Fed was clearly going to be cautious, all moves made gingerly and well telegraphed to conspicuously vulnerable markets. Given time, inflation would surely subside. The worst-case scenario would be the Federal Reserve and global central banks raising rates until something began to ‘Break.’ There was time. Rates would remain extraordinarily low for months and even quarters. Nothing too pressing. Well, complacent markets – and central bankers – grossly misjudged two key aspects of underlying fundamentals. Inflation Dynamics were much more powerful and well-entrenched than appreciated. Similarly, Market Structure fragilities were greatly more acute than recognized. The upshot: things are ‘Breaking’ before central bank tightening cycles even get cracking.”
