Australian Financial Review
FEB 15, 2018
So with new regulations came new shell games to hide the risks that banks take. The vast murk of the derivatives market is an easy and nearly regulation-free zone where the wildest casino bets can be placed well off the formal balance sheet radar.
We forget how extreme and extraordinary, and how unilateral and conducted-in-the-dark the machinations of The Fed were in 2008. This time, many of the measures they employed are no longer at their disposal.
The rules themselves have pushed ever larger parts of the money nexus into the shadows or into untested new instruments - "outside the perimeter" - and that is where the nitroglycerine now sits.
The structure is arguably more dangerous today than it was on the eve of the Great Recession:
What saved capitalism in 2008 was epic action by the Fed to shore up the commercial paper and the asset-backed securities markets, and to head off an implosion of the money market industry.
The situation would be comical if it were not so grave. The Fed and fellow central banks have stimulated a titanic expansion of debt over the last quarter century: an asymmetric policy of letting booms run their course while always intervening to prevent busts, culminating in the final throw of QE.
ORIGINAL SOURCE: No lender of last resort when the 'everything' bubble bursts by Ambrose Evans-Pritchard at Australian Financial Review on 2/15/18