Tickerguy on Russia Today: Is It 2008 Redux?


Is it 2008 redux? That’s the question on everyone’s mind. Are we in store for another financial crisis. But handicapping the ultimate fat tail risk — the end of US Dollar hegemony — has been the death knell of many trend forecasters over the last few years. So let’s look at the evidence — keeping in mind that clever line from Mark Twain about history rhyming — not necessarily repeating. When the Fed stopped buying bonds and instead sold them in the summer of 2008, short term funding markets seized up. There was a mad dash for cash — precipitating Lehman. Now we have talk of tapering — another wind down of bond buying. But so far it’s just talk. The Fed announced it’s requiring banks to hold more capital and reduce leverage — all part of Basel banking regulations. The word from our Fed Chairman above is that banks need to lower leverage. Perianne Boring breaks down rehypothecation and explains where this leverage comes from. We know banks are borrowing on the cheap — and so is Uncle Sam. So what happens when the thirty year *down* trend in interest rates reverses? Bob talks to Karl Denninger, Host of “The Market Ticker” and author of the book Leverage.