Why is this financial market crisis different from all other crises?

How is the tsariff induced financial market cdrisis different from those in the past?

On the first night of the Jewish celebration of Passover the following question is asked:

Why is this night different from all other nights?

In the days that followed President Trump’s April 4 reciprocal tariffs announcement the following question should be asked::

How is this financial crisis different from those in the past

The first answer is that it was created by one man and could have been avoided.

The second answer is that in past crises, the Fed responded by cutting interest rates and flooding the economy with liquidity.

This time around the Fed’s hands are tied for now as it faces the dilemma of its dual mandate:

1) Maximum employment
2) Price stability

The Fed’s dilemma

On April 4 Fed Chair Powell noted that the tariffs were larger than expected and likely to lead to higher inflation and slower economic growth.

In his speech, Powell affirmed the Fed’s commitment to keeping inflation expectations anchored. He said the Fed would carefully assess the situation as it evolves before deciding on any changes in policy .

In other words, there is no Fed put as a backstop for now during a financial crisis meltdown.

US500 DAILY CHART – Note move down since April 4

The Fed’s dilemma is how to react to a financial market crisis as the economy likely slows, unemployment rises while prices increase and inflation expectations stay elevated. This sounds like a risk of stagflation that would likely keep Powell and Fed members up at night.

This crisis is different 

This crisis is different than those experienced in the past.

There is no Fed put

It is up to Trump & Co. to recognize it has created a financial crisis and it cannot count on the Fed to bail it out,

So far, cries of those seeing their 401k accounts plunge in value have been met with deaf ears and benign neglect.

Bottomline is this crisis is different from past crises and it it time for the White House to wake up to the reality that it has a financial market panic on its hands without the usual Fed standing ready as a backstop.

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