Regarding “Risk is Contained…do you remember this?
On May 17, 2007 Federal Reserve Chairman, Benjamin Bernanke, was questioned about the risks showing up in the subprime mortgage market.
His response:
“We believe the effect of the troubles in the subprime sector on the broader housing market will be limited and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.”
Then came 2008 and the rest, as they say, is history.
Ironically (or NOT) in 2018, the Financial Times published an article “US Subprime Mortgage Bonds are Back in Fashion.”
The article stated that people with credit scores (FICO) as low as 500 are, once again, able to obtain mortgages.
The mortgages are packaged and sold as “subprime” (risky). And amazingly the demand for them is off the charts.
The rating agency S&P (who willfully looked the other way at subprime mortgages in 2008) is quoted (by a Mr. Saha) in the Times article as saying “The risk is contained, in our view,” *
Translation: That means “The risk is contained…in tax payer bailouts.”
(* Side note: Didn’t officials in Japan say “The risk is contained” about the awful melt-down of the Fukushima nuclear plant?)
Fast forward to 2026 where we will eventually experience the real cost of war…where risk is NOT contained.
Contrary to popular belief, war spending does create economic activity in the short term, but it does not create sustainable growth.
It destroys capital and then requires additional capital to rebuild what has been destroyed.
Every missile fired, every aircraft deployed, every ship sent into a conflict zone represents capital consumption, not capital formation.
The request for $200 billion (“…small price to pay”…according to Trump) to replenish stockpiles illustrates another reality that is always ignored.
War does not end when the shooting stops.
The financial obligations continue for years through the replacement of equipment, the expansion of industrial production, and the long-term care of personnel.
That is why the true cost of war is always measured over decades, not months.
So, when you hear stupid politicians spewing nonsense like “Risk in Iran is Contained” run for the exits.
BTW, the same Banksters and politicians are saying “Risk is contained” in the private credit market.
Huh?
The Banksters don’t want you to know that there is a sector-wide liquidity squeeze in a $2.1 trillion market that is facing its most serious stress test since 2008.
Unfortunately, we are in a war that we cannot win combined with a classic LIQUIDITY CRISIS being covered up by Wall Street.
Don’t get caught off guard like 2008.
Learn how to read between the lines and connect the dots so you can side step this oncoming freight train (HERE).
“At Financial$ Matter, we don’t just reveal Wall Streets greed/corruption. We show you how to profit from it.”
Share this with a friend…especially if they are clueless about the current risks in the bond market. They’ll thank YOU later.
And tell them:
We’re Not Just About Finance
But we use finance to give you hope.
“And you shall know the truth, and the truth shall make you free.”
