It’s hard to believe, but yes. The financial system, that we know, have already collapsed and never recovered back.
Let’s take a look at what happened.
Earlier than you think
It all started in 2000, with the promise that every American will own a house and with mortgages with very low requirements for loan approval. Anyone could have a mortgage, even people that had no income. So a real estate bubble began to form, which at some point of time had to burst. The bubble lasted until 2006. Everyone believed that real estate prices could rise indefinitely. The market continued to deteriorate, and in 2007 the Fed’s General Meeting was held to address the market issue.
Although the Fed provided sufficient liquidity to the market, on 9 August 2007, LIBOR (London Interbank Offered Rate) and EFF (Effective Federal Funds) collapsed. Whenever market participants saw the growth of LIBOR, they borrowed at a favorable EFF rate and made money on speculation. This helped to keep the market stable. Once that happened, it was just like if the world had stopped.
The crisis continues to this day
The Fed has lost control of the market. Any attempt to rectify it failed. Rumors have even begun to spread that most assets are already illiquid. This was the moment when the financial market collapsed and could no longer recover. Many of you, with the word “crisis”, will surely come up with the name Lehman Brothers, a bank, founded in 1847, which collapsed in 2008. However, this was not the beginning of the crisis, only one of the banks that fell.
Since the introduction of quantitative easing and other short-sighted efforts to heal the market, the crisis has basically persisted. The latest global development with COVID-19, quaranteens and lockdowns did not help this situation, with central banks continuing with their money printing. But what can be done with that? Maybe there is a way, but it has to be within a new financial system.
Another piece in the puzzle is that as a result of the 2008 crisis, the first cryptocurrency Bitcoin was born. New hope was borne that we can still have a financial system we can trust. Because the current one has fallen apart and there is no chance that it will ever recover. We need new financial system – such a system we can trust.