This week, financial markets were buffeted once again by events that not so long ago would have been improbable, if not unthinkable. The result has been considerable intraday volatility with a downward trend.
There is a natural inclination to explain each of these developments individually. But doing so could be a mistake as each is influenced by common phenomena, including a lessening of the effectiveness of central bank policies. This could have consequences that are even more severe if the turmoil spills over into the real economy.
A partial list of this week's attention-grabbing developments demonstrates the degree of volatility we are experiencing:
Amid a global banking sector selloff, the stock prices of several large European banks overshot and traded at levels not seen for several decades.
Oil prices ended another volatile session on Thursday just above $25 a barrel, a level not seen for more than a decade.
European bond yields fell to eye-popping levels. This is true even of those already trading at negative nominal yields.
The Swedish central bank pushed its policy rate further below zero, to minus 0.50 percent from 0.35 percent.
On the foreign exchange markets, the dollar weakened against the currencies of advanced countries, most notably the yen, even though the Bank of Japan has taken its interest rates negative.
