The New York Times: How Far The USA Is From Becoming Britain

The market crash In Britain I have bothered United States of America. its researchers and officials Federal Reserve Request experts from Wall Street And around the world last week on this topic: Could there be a market crash like the one that happened in the United States in the United States Britain At the end of last month?

as revealed The New York Times, the answer they got, according to four people at different organizations who took part in such conversations — and who spoke on the condition of anonymity to describe the private meetings — is that it is likely to happen — even though a crash doesn’t seem imminent. while the The Biden administration did its own investigation On the possibility of a crash, other market participants conveyed the same message: The risks of a financial crisis increased as central banks raised interest rates dramatically.

The Bank of England Had to step in to buy bonds And calm the markets after the British government announced a budget expenditure plan To boost an economy already suffering from high inflation, but it came with few details on how to pay for it. The Markets sank And the pension funds Those who use a common investment strategy find themselves trying to adapt, causing this Central bank intervention.

while the shock It was great for the UK backlash It made economists around the world wonder if the situation was a sign of economic pressures emerging around the world.

its officials The Federal Reserve, the Treasury, and the White House Among those trying to find out whether United State They could face their own market crash, which could be costly for them families While it will complicate America’s fight against inflation.

Worrying about a dangerous chain reaction

Officials seem confident that the US financial system is unlikely to see such a financial system shock And strong enough to withstand such a shock. But both of them and the Federal Reserve are closely watching what is happening at the time Conditions appear unusually fragile.

Markets have been volatile for months in the US and globally as central banks – including the Federal Reserve – are rapidly raising interest rates. interest rates To control inflation. This has caused Unusually large price movements in currencies And in other assets, because Their values ​​depend in part on the level of interest rates and international interest rate differentials.

Stocks move. Probably Difficult to quickly find a buyer for US Treasury bonds, although the market does not collapse. And in the corners of the financial sector that involve more complex investment structures, there are Concern that volatility could trigger a dangerous chain reaction.

“In the market, there is a lot of anxiety, and everyone says it feels like something is going to fall apart,” the master said. Roberto Burelli, An economist at Piper Sandler who worked at the Federal Reserve did not participate in the discussions last week. He points out that it is reasonable for officials to check the situation.

The President Biden He repeatedly called his top financial aides in recent weeks to discuss Market turmoil, like the one that shook Britain.

Federal Reserve officials and employees met Investors And the Economists Whether during its annual meetings or on the sidelines The World Bank and the International Monetary Fund Last week in Washington.

critical questions

Fed investigators asked about Three big possibilities during meetings. They wanted to know if it could exist in the United States A commercial or investment class similar to UK pension funds which can be a significant threat and are not highly regarded.

They also focused on whether problems abroad could spill over into the US financial system.

For example, file Japan He is one of them The largest buyer of US debt. But the Japanese currency is depreciating rapidly because it keeps interest rates low, unlike other central banks. If this turmoil causes Japan to reverse course and stop buying or even selling US Treasuries – something she has indicated little inclination to do but which some on Wall Street see as a risk – it could have repercussions in US debt markets.

The last threat they asked about focused on whether The current lack of easy transactions in the government market It may turn into a more serious problem that requires the Fed to intervene in a fileDelegating normal operation.

Analysts told officials that none of these areas appeared to be in immediate danger. The The retirement system in the United States is different from that in Britain and the government debt market It may be unstable, but it still works.

However, they did express their concerns: It’s impossible to know what might break until something is done. Markets are large and interconnected, and comprehensive data is hard to come by. Given how much central bank policy around the world has changed in recent months, something can easily go wrong.

There is good reason for officials to be concerned about this possibility: A market crash now would be a particular problem.

A financial disaster may force the Federal Reserve to do so deviates of its plan to control the fastest inflation in four decades, which includes rapidly raising interest rates and shrinking its bond portfolio. Officials have bought large amounts of Treasuries in the past to restore stability to weak markets – essentially the opposite of current policy.

The Central bankers Perhaps they are trying to distinguish between a bond market that aims to maintain market performance and monetary policybut this can hardly be known.

Why is the White House concerned?

The White HouseAlso, he has cause for concern. Mr. Biden distinguished himself by his experience as Vice President during her tenure big disappointmentduring which The economic collapse caused the worst recession since the 1930s, Putting millions out of work and exhausting the government’s political agenda Obama For years the recovery is painfully slow.

Mr. Biden pressed his team to assess the possibility that The US will face another Wall Street shock in 2008. The Treasury Secretary Janet L His deputies closely monitor market developments for the public sector US debt They are looking for any UK type signs.

While administration officials noted that trading is becoming more difficult in the Treasury market, they also emphasized that otherwise it is doing well. Several officials said this week that they expect The Fed will intervene to buy bonds – as he did Bank of England – in case Emergency.

Other management officials withdrew from their meetings in Washington last week amid growing concerns about financial crises in so-called emerging markets, such as parts of the Africa, Asia and South America. there where rate food and energy soared. Higher interest rates have prompted governments to raise borrowing costs. Such crises can spread worldwide and recovery in richer countries such as United State.

However, officials say the US economy remains strong strong to endure like this vibrationsDriven by the rapid growth of jobs and related activities Low levels of family debt.

“she Tough global economic moment Where stability is hard to find.” Michael Bale, Biden’s deputy national security adviser for international economic affairsBut the United States has the momentum and resilience behind its economic recovery and the path that puts the United States in a strong position to address this global challenges».

A senior Treasury official said this week that Financial risks increased with high inflation and high interest ratesBut he said the various data the division tracks continues to show strength in US companies, households and financial institutions.

At the moment, short-term borrowing markets, which are essential to the functioning of finance as a whole, look perfectly healthy and normal. Joseph Abate, CEO of Barclays. Officials are working on Warranties To reduce the impact in case disaster.

The Financial Stability Oversight Boardheaded by Mrs. softensAt their last meeting earlier this month, they discussed the issues, and listened to employee presentations on financial vulnerabilities in the United States.

Market liquidity is an issue

The Public Borrowing Advisory Committeean advisory group of market participants, in its recent survey on a potential government program for Buying government debt. Some investors took this as a sign of concern about a potential problem and improving market performance, particularly in light of their comments and reach.

«We are worried about losing enough liquidity in the marketMs. Yellen said last week in response to questions after a speech in Washington.

The Fed already has excellent tools that can help stabilize markets. These include exchange lines that can transfer dollars to banks that need abroad and that have been used before Switzerland and the European Central Bank in recent weeks.

Mr. Abate V Barclays He said it appears that the Securities and Exchange Commission, the Treasury and the Federal Reserve are monitoring the situation.

“It is clear to the market that liquidity is a concern,” Abate said. “Regulators are moving in to deal with it.”