Your Lying Eyes

Dedicated to uncovering the truth that stands naked before your lying eyes.

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22 January 2008

The Subprime Disaster

So the subprime mortgage crisis has turned into a world disaster. World markets plunged yesterday - trading had to be stopped on India's main exchange. How could poor lending practices be responsible for such a debacle? What sort of economic theory explains how so much money could be tied up in such low quality investments and then be lost at the first sign of a market correction that everyone knew would happen?

There was apparently a glut in investments floating around for the past few years, and it ended up in mortgages lent out to under-capitalized, poorly-informed, and inadequately vetted home buyers at the peak of a long and tiring real estate market. We put these funds in the hands of used-car salesmen turned mortgage brokers trolling for saps, turned these over to financiers who quickly bundled them up into packaged investments and sold them off before anyone had time to look into the contents. Now the entire world economy is at the brink of failure.

Again - which school of economic thought do we turn to for an explanation of all this?

6 Comments:

Anonymous Anonymous said...

Check out mansizedtarget.com's entry on this.

January 22, 2008 11:39 AM  
Blogger Cedric Morrison said...

The P. T. Barnum school?

January 22, 2008 6:36 PM  
Anonymous ziel said...

Yeah, Chris Roche usually has some interesting things to say. I really need to update my blogroll one of these days...

January 22, 2008 9:53 PM  
Anonymous James Francis (the other one) said...

Ziel-Mr. Roach is on board with the fact that Obama the activist is still Obama The Activist with his "we need hope" rant. This of course will work well with the "folks' who need hope- and a hot meal. His inner city appeal does not appeal to mid western working joe's or 8 million Jews in NYC. His resume has more blank spots than Mr Clinton- I mean Mrs. Clinton.

January 24, 2008 10:27 PM  
Blogger Glaivester said...

It's called the Austrian school.

January 25, 2008 7:48 AM  
Blogger ziel said...

Glaivester - good point!

January 25, 2008 8:51 PM  

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