“The problem is a shortage of liquidity – that is what is causing the problems with the banks. It feels exactly as it felt in 2008,” said one senior London-based bank executive.
“I think we are heading for a market shock in September or October that will match anything we have ever seen before,” said a senior credit banker at a major European bank.
A quick look at Kaleidic Economics’ Austrian measure of the money supply makes obvious why things feel as they did in 2008: the money supply is shrinking. That’s bad news. The answer is not more QE, which would postpone and deepen the problem, while enriching some at the expense of others. We need a fundamentally more stable monetary system.
More in due course.