With world markets ablaze, it’s tempting to compare these dizzying days to the last time so many asset values fell through a trap door. Though there are similarities, 2008 was different in many ways.

That’s not to say today’s pain doesn’t cut deep. The litany of losses -- biggest oil-price plunge since 1991, record-low Treasury yields, the S&P 500 down 12% in 12 trading days -- may not match the darkest days after Lehman Brothers Holdings Inc.’s bankruptcy filing, when Wall Streeters tapped their ATMs because they thought banks had little cash left and solvency worries dogged even the biggest institutions. But the panic that comes with the uncontrollable loss of years of meticulously amassed wealth has activated a kind of muscle memory for people who were around last time.

“The situation is much different than 2008, but from the standpoint of emotional fear it is very similar,” said Jim Paulsen, chief investment strategist at Leuthold Group.

Stocks were faring better on Tuesday, and oil prices gained back some of their losses. But for this market chaos to be credibly compared with 2008 is a feat. The financial crisis remains a tough act for other downturns to follow. Millions of Americans lost their homes after lenders sold them loans they couldn’t afford. When banks packaged the loans into securities and peddled them to international investors, who lost their shirts, the contagion associated with so-called subprime borrowers sparked the longest and deepest recession in the U.S. since the 1930s.

But 2008 didn’t have the 2020 version of contagion -- the deadly coronavirus, which seems to pop up in new places every few hours.

Those who remember with dread when financial policy makers, including Federal Reserve Chairman Ben Bernanke, erroneously said that the subprime contagion was “contained” are no doubt experiencing a chilling déjà vu these days, as the same word is used by White House advisers including Larry Kudlow and Kellyanne Conway to describe the virus.

“What’s happening now isn’t about a weak financial sector, which was the case in 2008, when there was also a lot of uncertainty about who held troubled securities,” said Nellie Liang, former director of the Fed’s financial stability division and now a Brookings Institution researcher. “This is about a slowing economy and uncertainty about how a virus will play out.”

Oil Prices
It’s also about crashing oil prices triggered by a blinking contest between Saudi Arabia and Russia. Though U.S. banks have loans out to shale drillers, some of whom may not survive, the financial system is stronger today than it was in 2008. Government regulations enacted since the crisis require banks to carry bigger reserves in case of loan losses. An 11-year bull market in stocks and the longest economic expansion in history added to their health.

In an echo of 2008, JPMorgan Securities Chief Economist Bruce Kasman warned of “a powerful global deflationary wave.” That’s when central banks usually swoop in to save the day. Starting in 2007, the Fed showered markets with 10 rate cuts, bringing the borrowing benchmark from 5.25% to near zero, where it stayed for seven years.

Fewer Bullets
This time, central banks have fewer bullets in their bandoliers. Interest rates around the world are already flirting with zero, and in some cases have dipped well below. Even emergency cuts may not be the answer, as the Fed discovered last week. Cheaper money is unlikely to be the magic wand that provides materials for starving factories or allay coronavirus fears that keep folks from shopping, traveling and dining out.

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