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Financial Fragility in ‘Mature’ Markets
With rising non-financial corporate debt and evidence of elevated borrowing levels among non-bank financial companies, the fragility resulting from excess leverage has returned to haunt developed country financial markets. The fact that the collapse of a little-known family office firm like Archegos Capital Management inflicted huge losses on leading banks suggests that the failure of a rogue, overleveraged speculator can have systemic effects of the kind that unravelled in 2008.
With rising non-financial corporate debt and evidence of elevated borrowing levels among non-bank financial companies, the fragility resulting from excess leverage has returned to haunt developed country financial markets. The fact that the collapse of a little-known family office firm like Archegos Capital Management inflicted huge losses on leading banks suggests that the failure of a rogue, overleveraged speculator can have systemic effects of the kind that unravelled in 2008.
At the end of March 2021, when the world was worn out having spent more than a year battling the ongoing pandemic, news broke out that Wall Street traders were searching for the source of a fire sale of tech, media and other stocks to the tune of around $19 billion. That burst of selling had resulted in the collapse of prices of the stocks of companies like ViacomCBS, Baidu and Tencent Music, wiping out some $33 billion in share values.
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