Revisiting the 2008 Global Monetary Crisis because it’s Coming Back with a Vengeance this Year

As we step into a new year, the ghost of the 2008 global monetary crisis still looms large over the fiat financial system.

More than fifteen years have passed, yet the financial earthquake that shook the world in 2008 was never fixed. It was merely “papered over” setting the stage for a grand, catastrophic finale that will bring down the great global fiat currency debt system experiment which began in 1971 (when the United States ended it’s peg to gold).

The 2008 crisis wasn’t just another financial downturn; it represented a seismic shift that transcended the confines of specific assets or sectors.

Unlike an asset bubble like the 2000 dot-com crisis, which primarily affected specific industries, the 2008 meltdown was a global monetary catastrophe.

It went beyond the devaluation of a few assets; even fundamentally sound assets had to be repriced lower due to a severe shortage of cash to purchase them. This scarcity of funds led to a worldwide liquidity crisis, impacting the circulation of money throughout the international financial system.

What made the 2008 crisis different was its global character. The crisis extended beyond the United States, affecting the global financial landscape through the Eurodollar market.

The Eurodollar market, despite its name, is not about Europe; it involves the circulation of US dollars outside the United States and played a pivotal role in the crisis. The shortage of dollars in this international market had a far-reaching impact, leading to a liquidity crisis that affected the worldwide circulation of money.

European banks were ensnared in this dollar shortage, resulting in a tidal wave of fund outflows, which went beyond bad loans and represented a struggle for liquidity in the global financial system.

Fast forward to 2024, and the aftershocks of 2008 are still being felt.

The government-induced economic shockwaves of the COVID-19 pandemic have only served to exacerbate the existing challenges stemming from the 2008 crisis.

Central banks continue to grapple with the long-term repercussions, with discussions and actions indicating ongoing concerns about a return to the gloomy aftermath of the crisis.

These actions are not just economic adjustments; they reflect a persistent worry about the prolonged impact of the crisis on the global economy.

To the non-financial reader, it’s crucial to recognize that the 2008 global monetary crisis isn’t just a historical event—it’s an ongoing issue with profound implications for the stability and functioning of the global financial system.