FT opinion article: “How shadow banks threaten the global economy”. The Fed seems to think the financial world is separate from the economy. See how that works out. Thread #markets #equities #bonds ft.com/content/d22ec3…
1/The author points out that the next crisis will arise from shadow banking “institutions”. Especially those that lend to corporates. They have a lot of debt, especially in the US, and the cost is set to rise.
2/Private markets are taking over from public ones, with investors seeking yield. “Swing a stick in Manhattan and you’re bound to hit someone involved in private lending”. Debt is now much higher.
3/ ”Markets which used to reflect economic trends. are now big enough to drive them”. The bigger risk is that an accident in the markets settles the debate over how hard Fed tightening will hit the real economy.
4/IMHO 100% correct. My main disagreement is the idea that a finacialised world is somehow different from the real economy. It is the real economy. And the Fed seems to think differently. See how that works out.
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