KIMIMASA MAYAMA/
European Pressphoto Agency
Gluskin Sheff’s David Rosenberg says its time to dust off the playbook from the 1987-1988 Asian Financial crisis. He explains why:
It was interesting to see CNBC run a slot on Friday comparing the current global market situation to the Asian crisis of 1997/98 — we have been drawing the comparison all year long. Every cycle has its differences and similarities, but there are commonalities here that cannot be ignored:Sound familiar? So what’s the playbook? Rosenberg continues:...MORE
But anyone that does not believe that the U.S. economy cannot decouple does not know their history.
- A sizeable chunk of the global economy imploding (30% back then)
- Half the region deflated outright
- Some of these countries had double-digit GDP declines and stock markets that melted by more than 50%
- And yes, the global economy and financial markets were highly integrated as well
Throughout that near-two year ordeal in the late 1990s, the yield on the 10-year U.S. Treasury note plunged 280 basis points — the Fed had a tightening bias on the books but could never pull the trigger. Oil prices collapsed 50% and industrial commodity prices fell by 25% while the trade-weighted U.S. dollar strengthened by 10%! The VIX index (“investor fear gauge”) jumped from 18 in the months prior to the crisis to a high of nearly 46 at the peak in October 1998.
