18 September 2017 Long•Term Asset Return Study. The Next Financial Crisis AAA government bond markets and helped contribute to the so called "bond conundrum". The lower yields that this entailed could only help encourage more and more debt accumulation elsewhere. Back to 1998 though, as a consequence of the Russian default and trades associated to it, US hedge fund LTCM unraveled leaving many US banks exposed. The Fed responded by brokering a bail-out and by cutting rates which prevented the crises spreading to systemic proportions. However one can argue that this triggered the excess of the global equity bubble over the next eighteen months as investors felt that the Fed was providing moral hazard. This triggered a decade of financial excess as market participants increasingly felt that the Fed had their back whatever was thrown at the financial system. Obviously this excess was punctuated by the equity crash of 2000 but as rates were cut from 6.5% to 1.75% in 2001 alone and to 1% by 2003, the moral hazard was back and the excesses allowed to build again. A fairly widespread global property bubble was ignited with that seen in the US ultimately the most destructive to the financial system given how many levered financial products were created on the back of it. Regulation as we now know was light and central banks generally felt that markets were the best judge of risk. Shadow banking activity was a huge driver of the excess in the system which would never have been possible in the heavily regulated markets of the Bretton Woods period or in any period where money creation was tied to precious metals. As the shockwaves spread, so Central banks and Governments had to intervene in sizes never before seen across the globe. The stresses this placed on European Government's balance sheets, coupled with the sharp reduction in activity and capital flows out of their debt then led to the European Sovereign crisis including the various rescue pack