Excellent Article…The Worst is Yet to Come…

By on August 23, 2008

This great and scary article regarding the problems we face contains quotes from Kenneth Rogoff, Nouriel Roubini, Meredith Whitney, Daniel Alpert and Jeremy Grantham.



An excerpt:

Back then, it was called a liquidity crisis. That was what brought Northern Rock down. Banks still clung to the hope that most of their assets were of perfectly high quality.

The short-term problem was simply that no one was willing to lend money to each other as they couldn’t be sure of where the toxic subprime loans were.

This was hopelessly optimistic. It’s important to understand that subprime wasn’t the root cause of this crisis. Subprime was merely the last straw. Subprime was the logical end-point of a system that had grown bloated and careless on cheap money and a complete disregard for risk.
Think about it. By the end game, lenders were giving loans to people who couldn’t even make their first mortgage payment, let alone 20 years’ worth of payments. So what does that suggest about the quality of their other loans?

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