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Don’t Get Fooled Twice by the Financial Industry

Feb 08, 2019 | Sven Henrich |

Don’t Get Fooled Twice by the Financial Industry

Written by Sven Henrich via Northman Trader

There’s no risk of a recession. Everybody says so. Fed Chair Jay Powell says so. Mario Draghi says so. The IMF says so. There seems to be a lot of coordinated certainty out there about one thing: No matter how uncertain things may be we are certain that nothing bad will happen.

No, really:

Well there you have it.

As I’m watching this global parade of confidence and certitude I can’t shake the sense that I’ve seen this story line before. Indeed this morning Todd Harrison sent me a friendly reminder that indeed we may be watching a remake here.

From the 2007 Minyanville article Todd sent me:

“February 21, 2007: “I’m waking up less at night than I was [over the slowdown in housing]. So far, there’s been remarkably little effect [from housing] on the rest of the economy.”- Janet Yellen

March 28, 2007: “At this juncture…the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained.” – Ben Bernanke

April 5, 2007: “The damage from the subprime market has been largely contained.” – Dallas Fed President Richard Fisher

April 20, 2007: “I don’t see (subprime mortgage market troubles) imposing a serious problem. I think it’s going to be largely contained.” – US Treasury Secretary Henry Paulson”.

In hindsight we can all of course laugh and say “hey look how wrong and naive these people were”, but the truth may be a lot more sinister than that because none of these people are stupid or uneducated. No, rather they were all in a position of power to know better than anyone else what was going on. Indeed if anyone should’ve have known it was them and perhaps they did.

And if they did know should they have told everyone? The truth? That subprime is a disaster ready to crush the economy? Could you imagine the fear and panic that would’ve ensued? No, with great power comes great responsibility and you just don’t shout “fire” in a crowded theater so the thinking goes.

Read the full article at Northman Trader: Fool Me Twice | Northman Trader