That’s a very narrow view of the situation. While the U.S. government and U.S. financial institutions deserve a substantial share of the blame, it’s a global problem. The actors are scattered all over the globe. Even in, dare I say it, Canada.
Why that month in particular? I was hearing rumors and getting memos at work in late '05. Got laid off from my job at Bear Stearns in Jan '07; my home value started to drop irreversably in March of that year (actually dropped a good deal in late summer '06 but then regained the drop plus a little more, only to plummet from 3/07 til now with no end in sight.)
It is written that the Financial Armageddon shall not come before the Rapture of the Fortune 500.
Well, Gramlich alerted Greenspan to some potential problems early in the decade…
And yes, there were certainly murmurings before Summer 2007: it was clear in 2006 that due diligence was not occurring. Calculated Risk began blogging in Jan 2005, spurred by the emerging problems.
Real housing prices probably peaked in 2005 or 2006.
But a liquidity crisis struck in August 2007, and came back in recurrent waves. Check out this graph of the TED spread. When it’s above 1%, it’s abnormal. It’s currently at 2%, down from about 4.5% last month. And in September 2007, there was a bank run on Northern Rock.
Anyway, that’s what I had in mind.
Interesting graph. It supports my belief that the sudden “Credit Crunch” last month was especially dangerous, far more dangerous than long-term trends like inflation and housing foreclosures.
We’re in a deep recession now, but recessions happen all the time. I don’t think we can afford another Great Depression, though – certainly not in the major cities. People are far too disconnected and far too dependent on credit cards & technology (cell phones, Internet, etc.) that a return to a pre-Industrial, agrarian society would be impossible. Iceland’s economy is fucked, but the people are getting by okay because they have a small population and a wealth of natural resources (i.e. fish) that will allow them to survive this crisis. The same thing can happen here, and it’s possible (though not provable) that we came right to the brink last month, only weeks or even days away from total catastrophe.
That’s just my opinion, of course…(and my current novel is about what might have happened, if events had continued their downward spiral.)