The banking crises is spreading not only in the US but also the overseas. What is creating doubt with the financial institutions and spooking the market?
A term coined by Alan Greenspan, former Federal Reserve Chairman, is “irrational exuberance.” Which describes the investors’ enthusiasm and optimism are so buoyant that a bubble is created in the market that is out of sync with the fundamentals. And invariably, the bubble will burst and the crashes.
Whether the irrational exuberance or fear, no one wants the market to crash. The housing bubble (2007) and the global financial crisis (2008) were the two classic examples. And it’s the Federal Reserve’s job to raise the interest rate, put a brake on the overheated market and avoid a crash, fingers crossed.
Then comes Janet Yellen, current US Secretary of Treasury and former Federal Reserve Chair. Infinitely qualified on the subject matter than I. However, this week Yellen gave some confusing statements on the banking turmoil that sent the stock market into overdrive.
Maybe people are being irrational and reading too much into Secretary Yellen’s messages. But one thing is clear that neither helps to put out the fire.
Do you think a recession or something worse is around the corner?