Seriously folks, did you think you'd ever see runs on banks in your lifetime?
I didn't.
But here we are. And away we go.
Get ready to see some real serious sh*t.
Showing posts with label financial collapse. Show all posts
Showing posts with label financial collapse. Show all posts
September 15, 2007
HousingPANIC Stupid Question of the Day
March 07, 2007
Krugman: Market Meltdown And Irrational Complacency - "Why didn't they see the risks?"
Krugman is another of the guys who simply gets it (like Shiller, like Schiff). Here's his latest column, written a year into the future, when it will all seem so obvious.
Everyone ready?
The great market meltdown of 2007 began a year ago, with a 9 percent fall in the Shanghai market, followed by a 416-point slide in the Dow. But as in the previous global financial crisis, which began with the devaluation of Thailand's currency in the summer of 1997, it took many months before people realized how far the damage would spread.
What made the market so vulnerable to panic? It wasn't so much a matter of irrational exuberance — although there was plenty of that, too — as it was a matter of irrational complacency.
After the bursting of the technology bubble of the 1990s failed to produce a global disaster, investors began to act as if nothing bad would ever happen again. Risk premiums — the extra return people demand when lending money to less than totally reliable borrowers — dwindled away.
Sooner or later, however, reality was bound to intrude. By early 2007, the collapse of the U.S. housing boom had brought with it widespread defaults on subprime mortgages — loans to home buyers who fail to meet the strictest lending standards. Lenders insisted that this was an isolated problem, which wouldn't spread to the rest of the market or to the real economy. But it did.
In retrospect, the complacency of investors on the eve of the crisis seems puzzling. Why didn't they see the risks?
Everyone ready?
The great market meltdown of 2007 began a year ago, with a 9 percent fall in the Shanghai market, followed by a 416-point slide in the Dow. But as in the previous global financial crisis, which began with the devaluation of Thailand's currency in the summer of 1997, it took many months before people realized how far the damage would spread.
What made the market so vulnerable to panic? It wasn't so much a matter of irrational exuberance — although there was plenty of that, too — as it was a matter of irrational complacency.
After the bursting of the technology bubble of the 1990s failed to produce a global disaster, investors began to act as if nothing bad would ever happen again. Risk premiums — the extra return people demand when lending money to less than totally reliable borrowers — dwindled away.
Sooner or later, however, reality was bound to intrude. By early 2007, the collapse of the U.S. housing boom had brought with it widespread defaults on subprime mortgages — loans to home buyers who fail to meet the strictest lending standards. Lenders insisted that this was an isolated problem, which wouldn't spread to the rest of the market or to the real economy. But it did.
In retrospect, the complacency of investors on the eve of the crisis seems puzzling. Why didn't they see the risks?
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