Yes.

It’s two different things or two things that are related to each other.

Number one, 2008 was not a one-off event. Everybody assumes it was. It happened. It’s over with. We’re onto something else. No, it was an inflection point.

 The system before 2008 that is the system that existed before 2008 no longer exists today. It’s still in place, but it doesn’t work. It doesn’t work for the people inside it. It doesn’t work for the people outside of, because very few people are aware that it’s there. Very few people are aware of what it does. It hasn’t received the kind of recognition that requires and it deserves. The other thing is that what was going on in the system that existed before 2008 was unstable.

It was a ridiculous kind of system because it rewarded all of the worst kinds of behaviors.

In some ways it was like a spinning top — a spinning top spins fast seem stable, but as soon as it starts to slow down, it wobbles and falls.

So, what we’re really talking about here is a credit based global monetary system . . . and credit-based means something. It means that it requires bank balance sheet capacities for this thing to operate to have at least have the appearance of stability.

If the banks aren’t willing to put in the resources, to put in liquidity, and to put in the balance sheet expansion for that system to operate — the inherent instability in it shows up.

Again, we’re asking the question, where are the banks? Why are they sitting on their hands? That’s the reason. If you’re looking at it from an overview perspective, going back to 2008, the system was never ever fixed. Bear Stearns went out of business. I mean, yes, Bear Stearns was merged and as far as the Fed was concerned, and was therefore a successful rescue.

But if you’re a manager of bear Stearns, you’re a shareholder of bear Stearns. That’s not how you view it. You lost everything.

The important takeaway was that the partners and shareholders of Bear Stearns saw what the downside of this is and that message was transmitted to all the rest of the banks. They understand post-crisis there’s no Fed behind everything. Liquidity is shaky and we don’t really want to do this anymore. Even when the Repo rates is 10% that’s not really enough because we’re aware of the potential downside and the potential risks that could be out there … and, oh, by the way, the Fed isn’t.

So, what is the conclusion?

The main takeaway is simply that something’s going on.

Even if you don’t know exactly what it is, you got to say, “Hey, something’s going on here and it doesn’t seem like our policymakers, the authorities have a whole lot of answers”.

That’s important too because you have to realize that what’s going on in the system — what may be going on in the system — if there’s nothing behind it, if there’s no backstop behind it, what is there? Everybody’s taught from day one the Fed is the lender of last resort.

But, what if there is no lender of last resort? It’s a very different kind of risk spectrum.

Then if you thought, well, you know, Jay Powell will just do a standing repo facility and we’ll forget about this stuff. In other words, there’s something going on here. It’s a substantial thing and it entails risks not just to the repo market, not just to treasury markets (which would be a positive thing for tertiary markets because people would, would go into those markets and interest rates would fall further), but we’ve already seen the effects in the global economy.

I mean, think about what happened in 2018 or what was supposed to happen from 2018 to 2019 — Authorities were saying the economy is booming, inflation is going to break out. We’re going to do more rake hikes in 2019.

And yet, what happened in 2019 is the opposite.

We’ve got questions about a global recession.

Some economies that look like they’re already in recession — important ones like Germany that already look like they’re in recession.

There’s no inflation.

Inflation expectations have fallen since May 29^th

 And, oh by the way, now the Fed’s cutting rates and they’re not the only ones.

It’s global.

Central banks around the world are all cutting rates.

So, we’ve already seen the effects of the global monetary tightening. What we’re really talking about here is a global monetary tightening in the system that very few people understand, and it’s already had serious effects in the entire global economy.

So, what the recent repo rumble just emphasizes is this fact that there are negative monetary risks that have very real implications for pretty much anywhere around the world.