How The Next Downturn Will Surprise Us: Global Markets Have Grown 'Too Big To Fail'

After the fall of Lehman Brothers 10 years ago, there was a public debate about how the leading American banks had grown "Too big to fail." But that debate overlooked the larger story, about how the global markets where stocks, bonds and other financial assets are traded had grown worrisomely large.

By the eve of the 2008 crisis, global financial markets dwarfed the global economy.

Today the markets are even larger, having grown to 360 percent of global G.D.P., a record high.

Financial authorities - trained to focus more on how markets respond to economic risk than on the risks that markets pose to the economy - have been inadvertently fueling this new threat.

Over the last 50 years, every time the Fed has reined in easy money by raising interest rates, a downturn in the markets or the economy has followed eventually.

Markets have grown so large in part because every time they stumbled, central bankers rescued them with easy money.

It's a familiar problem: Like the big banks in 2008, the global markets have grown "Too big to fail."

https://www.zerohedge.com/news/2018-09-20/how-next-downturn-will-surprise-us-global-markets-have-grown-too-big-fail