Thread by @TheStalwart

I don't even know what people really mean by "Lehman Moment" anymore, but IMO, the greatest sources of market panic/pure fear come when it appears that the mechanics of the government/politics are incapable of doing bailouts/stimulus. (EG the TARP vote.

https://twitter.com/shishiqiushi/status/1440773617785049089

I don't think China will ever have this exact problem. They may have painful losses, and other calamities. But due to the nature of their system, there probably won't be a period where people wonder if Beijing is capable of bailing out the financial system.

Same with Europe. There were moments in 2011-2013, when it seemed genuinely possible that the nature of the euro area/ECB structure was not mechanically up to the task of stopping an uncontrolled financial panic.

Draghi's "Whatever it takes" speech, where he established that sovereign credit spreads were part of the ECB's mandate ended the crisis, but until that moment, I think there was ambiguity for various reasons about whether the political tools existed to end the panic.

In March 2020, the market panicked when it appeared (at first) as though Congress would go too small, and nobody appreciated the extent to which the Fed would backstop credit markets. But once those were established the panic ended.

Anyway, going back to China, all kinds of problems probably exist. And I'm far from an expert in the area. But right now, the assumption is that when push comes to shove, the government/PBOC can do whatever it wants to halt financial contagion, cause it can just create money.