Think of 2008 as a primer. A very difficult and disruptive primer. Nothing’s “fixed.” Markets never really cleared.
Additionally, as is explained below, the now 0% interest rates are almost locked there as the cost of serving US debt by the US government would explode upward with increased (and very likely closer to real market level) rates. That’s a sticky place to be to say the least.
But people will continue blissfully along, until they can’t. Then they’ll scream that “capitalism” messed everything up. Watch.
Bonds are debt. A bond is created when a borrower borrows money from a lender. And at the top of the financial food chain are sovereign bonds like US Treasuries.
These bonds are created when someone lends the US money. Why would they do this? Because the US SPENDS more money than it TAKES IN via taxes. So it issues debt to cover its extra expenses.
This cycle continued for over 30 years until today, when the US has over $16 TRILLION in size. Because we never actually pay our debt off (or rarely do), what we do is ROLL OVER debt when it comes due, so that investors continue to receive interest payments but never actually get the money back… because the US Government doesn’t have it… because it’s still spending more money than it takes in via taxes.
This is why the Fed cut interest rates to zero and will likely do everything in its power to keep them low: even a small raise in interest rates makes all of this debt MORE expensive to pay off.