War, disruptions caused by artificial intelligence, and chaotic markets: all alarm signals are present. But the lessons of the 2008 crisis could help us.
September is a month of unfortunate events. For unknown reasons, this month has been marked by a disproportionately high number of financial crises – perhaps because underlying issues become more evident after the end of the summer vacation:
- The United Kingdom abandoned the gold standard in September 1931.
- The British pound was removed from the European Exchange Rate Mechanism in September 1992.
- And now, 18 years ago this week, the collapse of Lehman Brothers bank plunged the global economy into a deep recession.
And in this September, there are reasons to worry:
- Oil prices are rising, leading to an increase in gasoline and diesel prices, exacerbating cost of living pressures.
- There is a massive sale of government bonds globally.
- There is also a warning from leaders in the artificial intelligence field, who believe it is timely to slow down the pace of their industry's development.
All of these factors together create the conditions for a new difficult September, as indicated in an analysis published in The Guardian.
Of course, it could be just a false alarm. It has been over six months since the US and Israel launched a war against Iran, and the impact of closing the Strait of Hormuz has been much less severe than anticipated in the spring.
It is possible that the current fear gripping the bond markets will quickly dissipate, especially if the wars in Ukraine and Iran end soon.
Donald Trump's repeated assertion that oil tankers will soon pass through the Strait of Hormuz unhindered has tempered the rise in oil prices. The pace of economic growth has not been significantly affected, and artificial intelligence has played a role in this development, both in the US and the UK.
History never repeats itself exactly the same
There are signs that tensions related to Iran are having an impact, albeit with a greater delay than initially anticipated, notes the British newspaper.
Markets no longer believe Trump's statements about an imminent agreement with Iran.
Therefore, the rise in oil prices above $100 per barrel in recent weeks has heightened fears of persistent inflation and central banks raising interest rates. And although the price of oil has not continued to rise, the cost of gasoline and diesel remains high due to refining capacity shortages.
For months, stock markets have been buoyed by the belief that there is no upper limit to the growth of tech sector stocks, especially those involved in artificial intelligence (AI). This theory is now being tested, and from Wall Street's perspective, the recent intervention by AI leaders, calling for a slowdown in development pace, was extremely untimely.
The fact that Trump rejects the need for stricter regulation of the AI industry is highly significant. This is only partially related to the US-China dispute for technological supremacy.
Financial markets now seem as fragile as at any time since September 2008, and with the US midterm elections approaching, President Trump must prevent the bursting of the stock market bubble fueled by the AI sector.
But history never repeats itself exactly the same.
Similarities and Differences Between 2008 and 2026
There are similarities between September 2026 and September 2008, but there are also differences:
The 2008 crash resulted from banks taking excessive risks to finance the US real estate market. This time, banks seem much less exposed; although some investments in tech stocks were likely based on unrealistic future profit estimates, it is clear that AI will have a positive long-term economic impact, unlike pre-2008 real estate investments.
It is wrong to believe that all speculative bubbles are the same.
However, there are lessons to be learned from the events of 2008. One of them is that if a financial crisis turns into an economic recession, as it did 18 years ago, then conventional doctrines are abandoned.
There will no longer be talk of central banks raising interest rates or the need for Finance Ministries to drastically reduce budget deficits.
The recent bond buybacks by the US Treasury - aimed at easing the pressure of rising interest rates on mortgages, auto loans, and credit card debts - reflected the Trump administration's concern about the current state of financial markets, but also demonstrated the much more vigorous interventions that a major financial crisis would trigger.
An even more important lesson concerns the need to control the situation after a financial collapse. Last time, the left was caught off guard, allowing the right to take the initiative. In the UK, there are already signs that the same scenario is repeating, with Finance Minister John Healey facing pressure to raise taxes or cut expenses in the budget to be presented next month.
Such an approach would be counterproductive, primarily because it would contradict Prime Minister Andy Burnham's argument that the 40 years of neoliberalism were a mistake that needs to be corrected.
People forget and ignore signs
If not now, then sooner or later, a new financial crisis will occur, warns the cited analysis. People forget. They become indifferent. They ignore the tensions in financial markets that have been allowed to become too large and too powerful.
Therefore, although recent events may pass without major consequences, it would be wise to prepare for a new collapse, like the one in September 2008. For any eventuality.
T.D.