Greenspan's Black Swan

[FRED]

Alan Greenspan, the lead author of the current economic and financial system crisis, helpfully suggested this morning that the crisis is the worst since WWII.

Market crisis worst since World War II: Greenspan
March 17, 2008 (India Times)

LONDON: The current crisis rocking the markets and global economy could turn out to be the worst since World War II, former US Federal Reserve chairman Alan Greenspan said in remarks published on Monday.

"The current financial crisis in the US is likely to be judged in retrospect as the most wrenching since the end of the Second World War," Greenspan said in a Financial Times commentary.

"It will end eventually when home prices stabilise and with them the value of equity in homes supporting troubled mortgage securities," he said, referring to the meltdown in the US subprime home loan market and subsequent massive losses for the banks holding the debt instruments.

His observation is astute albeit tardy, that the crisis is not due to liquidity constraints of insolvent financial institutions but to the falling value of collateral against which loans were made, that is, home prices. As long as the value of the collateral is falling, so too will the solvency of the lenders decline. Many borrowers, of course, were never solvent in the first place, and rising unemployment as the recession turns to depression is not going to help them.

To be continued...

[GRG55]

Re: Greenspan's Black Swan

Alan Greenspan, the lead author of the current economic and financial system crisis, helpfully suggested this morning that the crisis is the worst since WWII.

Market crisis worst since World War II: Greenspan

March 17, 2008 (India Times)

LONDON: The current crisis rocking the markets and global economy could turn out to be the worst since World War II, former US Federal Reserve chairman Alan Greenspan said in remarks published on Monday.

"The current financial crisis in the US is likely to be judged in retrospect as the most wrenching since the end of the Second World War," Greenspan said in a Financial Times commentary.

"It will end eventually when home prices stabilise and with them the value of equity in homes supporting troubled mortgage securities," he said, referring to the meltdown in the US subprime home loan market and subsequent massive losses for the banks holding the debt instruments.

His observation is astute albeit tardy, that the crisis is not due to liquidity constraints of insolvent financial institutions but to the falling value of collateral against which loans were made, that is, home prices. As long as the value of the collateral is falling, so too will the solvency of the lenders decline. Many borrowers, of course, were never solvent in the first place, and rising unemployment as the recession turns to depression is not going to help them.

To be continued...

..."It will end eventually when home prices stabilise and with them the value of equity in homes supporting troubled mortgage securities," he said, referring to the meltdown in the US subprime home loan market and subsequent massive losses for the banks holding the debt instruments...

Hey. What happened to his "real estate markets are local, not national (and some are a teenie tiny bit frothy)" line?

[Milton Kuo]

Re: Greenspan's Black Swan

In case anyone is interested, here is the full article from the Financial Times.

http://www.ft.com/cms/s/0/edbdbcf6-f...nclick_check=1

[dbarberic]

Re: Greenspan's Black Swan

and rising unemployment as the recession turns to depression is not going to help them.
To be continued...

I don't think I remember iTulip dropping the "D" word before (Depression). Has iTuliped changed its forecast?

Its sounding a lot more like Jim Puplava's Hyper-Inflationary Depression forecast starting late this year and rolling through 2009/2010.