Crude Parallels
The Great Recession was seven years ago so it might seem appropriate that our memories of the specific nature and order of events is lost to time. However, given that it will be a seminal event in history (hopefully not surpassed) there is less leeway to having such a short grasp on the important pieces. Part of that relates to trauma, financially speaking, whereby the economy is conflated with the “market” (either credit or stocks) in something like realtime. When the market crashed in October 2008, though, there was still debate on the economy even at that late moment.
On September 22, 2008, the October 2008 futures price for WTI surged by $25 per barrel, a record move, hitting a high of $130 intraday on nothing more than news of TARP’s introduction into Congress. This was one week after Lehman Brothers had failed, AIG introduced the world to “liquidity” and collateral in writing CDS (and JP Morgan’s central place in them) and various other big banks were on the precipice of total disaster. And despite all of that, oil prices in that intraday moment were only a dozen dollars or so below the July 2008 all-time peak.
Investors were concerned about “demand” but only slightly so as it related to, even by Lehman’s bankruptcy, still just a “slowdown.”
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