Before getting into an analysis of the violence of the market correction — which is intimately tied to a global market that has been propped up by monetary largesse that appears to have lost its power, therefore setting the stage for intense financial volatility across the globe — it’s important to put the reaction of governments across the globe in context.
Since the global financial system imploded under the weight of excessive leverage and reckless lending in 2007-2008, it came down to the major central banks to save the day. Former Federal Reserve chairman Ben Bernanke took the lead through aggressive interest rate cuts which led to quantitative easing, or monetary stimulus.
“Bad news is good news,” was a phrase knocked around Wall Street, indicating the Fed would come to the rescue in the face of negative economic indicators. And it worked, to a certain extent, having pushed stock markets — particularly in the US — to record high after record high, while unemployment has dropped to some of lowest figures on record. Yet, several market watchers have been arguing that these massive gains in asset prices were artificial, and that a major correction was inevitable.