This cocktail of vulnerabilities may explain the surprising speed with which mistrust among market participants spread around the world, causing several financial market segments to dry up temporarily. However, there is more to the present financial market turmoil than meets the eye of the casual observer.
When comparing the ongoing financial market turmoil with similar episodes in the past, it becomes evident that a process is at work in which macroeconomic and financial factors reinforce each other. This is particularly true and visible in the USA. Let me exemplify this interplay using the present financial market developments.