10 Years Ago

2008 Crisis

Gold Market Discussion

TEN YEARS AGO: The Financial Crisis of 2008

As the week began, gold continued to trade in the $1200 range; silver’s trading neighborhood so far in September remains just over $14.00.

Ten years ago this week the Panic of 2008 was picking up steam.  It turned out to be the biggest financial calamity since the Great Depression. 

That summer police in California were needed to maintain order as people desperate to get their money out lined up outside an IndyMac Bank.  The bank was taken over days later by the FDIC. 

The government soon had to take over Freddie Mac and Fannie Mae at a cost to taxpayers of hundreds of billions of dollars.

Bank of America was called upon to take over Countrywide Mortgage; Bear Stearns failed and was taken over by JPMorgan with the help of $29 billion from the Fed. 

On and on it went.  After a run on the bank, Washington Mutual, the nation’s largest S&L, failed.  It was followed by Wachovia Bank.  Lehman Brothers, which was founded in the 1840s, filed for bankruptcy.  It had survived the Civil War, two World Wars, and the great depression.  But it was undone in the Great Recession, and resulted in the largest bankruptcy in US history.  Taxpayer money and freshly “printed” Federal Reserve dollars were bailing out one institution after another:  The insurance giant AIG; Citigroup; Merrill Lynch. 

The carnage in the markets was simply unbelievable. 

The Dow Industrials crashed from 14,000 to 6,600.  All together $50 trillion disappeared from the world’s stock, bond, and currency markets.  By one estimate, the American people lost a quarter of their total net worth.

Perhaps the best indicator of the severity of the crisis is this number:  9.3 million American homeowners lost their homes to foreclosure or in distress sales.

Without comment, let me compare the essential metrics of where we were ten years ago and where we are today.

At the beginning of September 2008, total Federal debt was $9.6 trillion.  Today it is $21.4 trillion.

(The scope of the debt problem is global.  Total global indebtedness has skyrocketed over the last 20 years from $40 trillion to $250 trillion.)

The Federal Reserve’s Monetary Base, the amount of money it has “printed” to buy things like troubled mortgage and government securities, has quadrupled since the meltdown.

As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”