financialsense.com / DAVID KOTOK / 10/13/2017
“History doesn’t repeat itself, but it often rhymes,” Mark Twain supposedly once observed. As the Fed begins to shrink its balance sheet even as it determinedly jacks up interest rates, we would be prudent to consider where history has rhymed before and what we might learn from those instances.
This is the tenth anniversary of the launching of a criminal investigation into the collapse of Bear Stearns. Here is a link to a quick chronology of the demise of the firm: reuters.com/article/sppage014-n17240319.
Reflecting on these ten years and the history leading up to and since the financial crisis is important. At Cumberland, we attempt to learn from history, and we respect it. Among our 40-plus people we have some oldies, some not quite so oldies, and also some youngies who were still students when Bear Stearns failed. Our youngest employee’s age was a single digit when the financial crisis entered its early stages.
Let’s think about this for a minute. Anyone in the financial services industry in the United States who is under 40 has no, or only limited, experience of the pre-crisis period. True, there are now many books for those who have the time and inclination to read about what unfolded. A couple of them are ours. But time has presented us with new issues, and ten years of excess reserves in the global banking system and ten years of zero interest rates have been applied as a lubricant to ease recovery following the crisis period.