Fear about the unseen risks to the financial system rippled across the globe on Wednesday, breaking the brief calm that had settled over markets and deepening worries that a banking crisis could threaten the economy.
The turmoil was set off by a panic over the health of Credit Suisse, the 166-year-old Swiss bank that has been reeling from years of mismanagement and poor risk control and that warned this week about problems in its accounting practices.
Though
the Swiss bank’s difficulties differ from the woes of the American
banks that have collapsed in recent days, concern about Credit Suisse
added to a sense of dread about the economy in general....
The S&P 500 ended with a decline of just 0.7 percent... but...investors were worried about the economy. ...
“This is morphing into a bigger deal,” Priya Misra, head of global rates strategy at TD Securities, said, explaining the drastic moves in markets on Wednesday. “If this is not resolved quickly, we should talk about a deep recession as the base case — nobody was talking about a deep recession before.”
The moves dumbfounded some investors, who consider the economies in the United States and elsewhere as more solid than the turmoil suggests. They attributed the chaotic trading to the fact that investors were worried that it might be difficult to spot risks lurking after an unusually fast increase in interest rates over the past year. The moves also highlighted the fragility of the financial markets when investors lose their grasp of what could happen next.
We "fear" "unseen" things in the dark. We fear the unknown. When humans don't understand something they make it up, God or the Devil or conspiracy or a non-existent link between Silicon Valley Bank and Credit Suisse. We "morph it into a bigger deal." Fear "paralyzes" us, we fear even the act of acting.
Friends and enemies, turn on the light. See? The dancing monster in the corner was just shadow. This is not rational, the failure of the sixteenth largest bank in the U.S. does not cause "turmoil", "panic", not in rational space; this is "unreasoning", it is dumbfounding, it is not going to lead to a "deep recession." Period there.
