Subject: Economic System

Posted by Richard Turnock on 10/10/2008

Message:

By Paul Krugman, Oct. 9, 2008
NY Times, online
http://www.nytimes.com/2008/10/10/opinion/10krugman.html?em

“The current crisis started with a burst housing bubble, which led to widespread mortgage defaults, and hence to large losses at many financial institutions. That initial shock was compounded by secondary effects, as lack of capital forced banks to pull back, leading to further declines in the prices of assets, leading to more losses, and so on — a vicious circle of “deleveraging.” Pervasive loss of trust in banks, including on the part of other banks, reinforced the vicious circle.”

Follow Ups:

Economic System - Vinay Deshmukh 10/14/2008 
Economic System - Jay Forrester 10/15/2008
Economic System - Kaoru Yamaguchi 10/16/2008
Economic System - Dan Proctor 10/15/2008