Underneath the headline numbers were a series of movements that don't really make sense when lined up against one another. They amount to signs -- not definitive, but worrying -- that something is breaking down in the workings of the financial system, even if it's not totally clear what that is just yet.

Bond prices and stock prices were moving together, not in opposite directions as they usually do. On a day when major economic disruptions resulting from the coronavirus pandemic appeared to become likelier -- which might be expected to make typical market safe havens more popular -- many of them fell instead. That included bonds of all sorts and gold.


All this suggests that major financial players are experiencing a cash crunch, and are selling whatever they can as a result. That would help explain the seeming contradiction of assets that should go up in value in a time of economic peril instead falling in value.

As the 2008 experience shows, it's also a type of problem that the Federal Reserve is relatively well positioned to understand and respond to. In its role as lender of last resort, the central bank's job is to try to prevent a cash crunch in the economy, even if it has to take unusual means to do that.

Comments: Be the first to add a comment

add a comment | go to forum thread