When arriving to my job at an investment bank in February 2008, I walked into a storm of magnitude that still stands out in the 21st century. Thanks to creative financial engineering, the entire US financial system walked itself into a life-or-death situation of sorts. Due to the nature of debt and leverage products floating around, not only did the US system implode, but because of international participation, the rest of the world felt the effects as well.
Back then I knew little about finance as an industry. Through good fortune, the firm I worked for was primarily in the municipal finance sector. In shorthand it means bonds for public works — sometimes funded with taxes, sometimes with revenues, but overall a system where debt could be a public good. Without passing judgment on the nature of this system, I simply became a corporate cog in the big machine.
What stands out to me about the 2008 collapse is the adversarial relationship, at least from a public viewpoint, between corporate actors and the US federal government.
Because the government wanted to avoid another Great Depression, it did what it could to limit the damage to a severe recession. The method of achieving this was actually acting in the best interest of the bad actors such as “too big to fail” financial firms rather than the citizenry. Looking back, the bailouts papered over bad behavior and greed in a way that no lessons were learned and there were no mechanisms put in place to recoup the financial injections into the market that inevitably gravitated to the wealthiest class…investors.
This being noted, in 2008 and beyond the actions of the US federal government tried to reconcile the situation in a manner that could ease the pain. Through the Troubled Asset Relief Program (TARP) and the American Recovery and Reinvestment Act (ARRA), funds were washed through the financial system with the intention of creating some semblance of value with infrastructure projects. The most notable mechanism was the path to issuing “Build America Bonds” for eligible candidates.
That was the atmosphere in 2008. Now, in 2025, we are faced with another drastic upheaval of the financial system by way of top-down tariffs. At the time of this writing, the tariffs are highly contentious because they clearly are not in the best interest of the citizenry of the United States.
More to the point, the mechanism of the tariffs, combined with a seemingly strangled concept of federal responsibilities and regulation of fiscal behavior, brings with it no clear pathway to prevent a recession from becoming a depression.
On the contrary! The current administration’s policies of isolationism, offending allies, disrupting trade agreements and relationships, and seemingly welcoming an economic hazard of its own doing are a complete opposite of the approach in 2008. This concentrated disruption of stability was not prompted by any clear motivation of “responding” to a problem. No, this is a self-inflicted wound and it’s equivalent to cutting multiple arteries at once.
The worst is yet to come and there is no rescue brigade on the horizon like in 2008.
Whatever tools may be at the disposal of the Federal Reserve and the US federal government will not be able to undo the damage to reputation and relationships upon which so much commerce bases its functions on day-to-day. As much as humans fancy themselves civilized and sophisticated, as a whole, societies still have serious trust issues internally and therefore externally. That’s why the concept of “credit” exists worldwide for the most part and is a component of trade, of alliances, and of good will.
By first taking a chainsaw to the global relationships of a worldview nature — most easily seen in the conflict of the Russian invasion of Ukraine and the rightful concern expressed by Western interests…credit has been damaged. By next taking a chainsaw to the global trade relationships which have functioned for decades and, while problematic, have enabled commerce to proceed at a reasonable level…credit has been damaged. By exploiting internal divisiveness of the political spectrum and the wealth inequality where the investor class seemingly has unchecked rule over hundreds of millions of disenfranchised people in the United States…the nation can no longer trust itself.
Things are going to get a whole lot worse. There is no particular avenue for them to recover for a long, long time.
At best, rolling back the most offensive actions sparking a trade war only provides a window upon which to rebuild lost credit. In the meantime the damage to standing in a global system forces other entities to re-evaluate relationships in a way none of them asked to have to deal with. They will be angry with the United States, and rightfully so.
Basically, the US has handed every other nation an opportunity to negotiate with each other to the detriment of its own present and future. While in the US, people tend to have very short-term attention spans, this is not the case for longer surviving societies which, again, have weathered numerous conflicts of their own internal causes. There is no ultimate authority which can intercede and force nations to act against their own interests just in order to please the United States — not even the threat of armed conflict. Rather, to even mention aggression under the guise of self-protection can, and likely will, be met with even stronger collective determination to make new alliances worthwhile.
How can the US financial system possibly recover in the short term when the actions have created long term consequences? It simply can not. Once these effects finally dawn upon the hundreds of millions of US citizens now struggling to understand why and how the already class-stratified, politically disconnected society finally exposes the failures of governance kept under wraps by way of a relatively high standard of living, there will be no easy fix. There will be no leadership to turn to and believe in.
The nation will show that it is not indivisible, because it has torn itself apart and there is no help on the way…
English (US) ·