Another matter is that it’s difficult to model future dangers due to the absence of historical precedent.
Crises generally happen due to a boom-to-bust cycle, and investors understand what that looks like. That differs.
As much more fiscal action flows throughout the non-bank industry, through capital markets, horrible surprises could quickly erupt. Big US banks have improved their reserves to deal with this.
What’s more, ultra-low interest rates interrupts bank profitability. What probability would you give there may be a new financial catastrophe. Their typical response was 20 per cent during the next couple of decades.
These anxieties already have substantial impacts: they pushed business opinion longer in this month’s Oxford poll than challenging data justified.
Occasionally fiscal anxiety emerges more insidiously. Purists may quibble about whether this type of situation merits description as a”catastrophe.”