Saturday, Dec 29, 2007
Easy money, what other problems did it cause?
The New York Times: Credit Crisis? Just Wait for a Replay
"It was the greatest credit party in history, made possible by a new financial architecture that moved much of the activities out of regulated institutions and into financial instruments that emphasized leverage over safety. The next year may be the one when we learn whether the subprime crisis was a relatively isolated problem in that system, or just the first indication of a systemic crisis." - this may or may not be the Titanic, but either way we are going into years of tight credit which will bring UK house prices back to reality.
Posted by happyrenterz @ 09:22 PM (207 views) Add Comment
1 Comment
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1. Icarus said...
"The exponential growth of credit derivatives has created UNPRECEDENTED amounts of leverage on corporate (and every other kind of) credit," and "total losses to the financial system may be about equal to the amount of subprime loans that were issued" even though "many such loans will be paid off and those that default will not be total losses," This is because "the financial leverage placed on the underlying assets was so high that the losses multiplied". The question is whether the subprime debacle can be contained or whether it is the prelude to a much more serious debacle in the corporate credit markets. Given a likely recession in the US and elsewhere in 2008 AND the same kind of leverage in corporate credit markets as there is in other credit markets there seems to be a good chance that this much larger debacle will hit. This is very serious indeed.