Mystery

Between this London Banker post and this one of Felix Salmon’s, or more specifically the comments, surely one of the biggest economic questions must be “what did happen in the autumn of 2008?”

4 thoughts on “Mystery

  1. Pingback: The Financial Sector is still bad for Britain, and everyone else « Left Outside

  2. Well, from a US-centric view, the Bears-Stern’s Exception allowed all the I-Banks to lever up their own book increasing the demand for investments on top of the demand created by the Chinese currency peg, meanwhile Dr. Bernake was raising the discount rate faster and further than ever before attracting all the global hot money which the banks satisfied by mismatching duration of CDO’s through off-balance sheet SIV’s, then Bushco restated earnings(GDP)downward for the previous 3 years which scared off the global hot money causing a run, meanwhile AIG had been selling unregulated market insurance off-book to the point that its regulated business was at risk of shutting down main street for lack of contractually required liability insurance once the actually riskiness of the newly inovated sub-prime mortgage and CDO packaging came to the fore.

    In other words, excess capital creation through unregulated financial inovation and the Chinese currency peg leading to a market failure due to the use of excessive leverage by speculators. It seems like the usual, with the Bear-Sterns exception/Currency peg/hot global money providing the excess capital (the baby-boom’s 401k’s/pensions are also excess supply relative to the Gen-X’s small demand for capital.)

    Don’t expect there to be a consensus, ever.

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