Banks are failing. The market is down. The government steps in. The market is up. Banks are failing. The market is down. The government doesn't step in. The market is up. Banks are failing. The market is down. And the cycle continues...
Many have asked me what I'm doing in the wake of the current crisis that is upon us. My answer: "Start popping popcorn." You see, as a finance professor, I love this stuff. Not the panic and suffering and fear. But the mechanics - what is happening, how we got here, and what if anything can and should be done. I've got a lot to say, and the beauty of blogging is the fact that I can say it all and pretend that someone is paying attention.
So let's start here. I think it's interesting that anytime something bad happens in this world, there is a host of geniuses out there to claim foreknowledge of the whole thing. Just today, I read the following quote by financier Henry Clews...
As in every preceding crisis, the main cause was far too large a mass of credits -- that is, of debts -- for the amount of cash in which they were redeemable. Trade and speculation had long been so active, and too often reckless expanded, that this disproportion had become dangerous, and a menace to our safety...a serious reaction, a serious revultion, was inevitable unless we moderated our pace and mended our ways...I could foresee that this vast and growing disporportion between the volume of credits and cash would finally lead to collapse.
Here's the really interesting part. This was from a 1908 discussion of the Panic of 1907.
