Gas prices went nuts, remember? People couldn't afford any extra expenses because they were in debt up to their eyeballs. Then when their mortgages increased through their contractual interest rate adjustment something had to give. Most of these just people quit paying. Therefore, it wasn't long before no one was buying house, cars, furniture, stocks, bonds etc. and began paying off their debts.
A slowing of spending and the whole rotten shit house came down. But with any luck we'll re-inflate and within 5 or 10 years when the "boomers" retire the next bust will make this one seem pretty tame.
If we make it that far, of course. (lol)
Forget About Housing, The The Real Cause Of The Crisis Was OTC Derivatives
A slowing of spending and the whole rotten shit house came down. But with any luck we'll re-inflate and within 5 or 10 years when the "boomers" retire the next bust will make this one seem pretty tame.
If we make it that far, of course. (lol)
Forget About Housing, The The Real Cause Of The Crisis Was OTC Derivatives
Officially, roughly $604.6 trillion in OTC derivative contracts, more than ten times world GDP ($57.53 trillion), hang over the financial world like the sword of Damocles, but to the average investor the derivatives bubble is invisible. From the perspective of those outside the bubble, the explosion of OTC derivatives is a mania.
The inherent lack of transparency in OTC markets impairs price discovery and obviates the efficient markets hypothesis, i.e., that financial instruments are almost always priced correctly, thus OTC derivatives and the risks associated with them may be priced incorrectly, as in the case of American International Group’s CDS contract premiums.
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