(09-06-2013, 03:55 PM)CityFarmer Wrote: [ -> ] (09-06-2013, 01:03 PM)finnfinn Wrote: [ -> ] (09-06-2013, 12:40 PM)CityFarmer Wrote: [ -> ] (09-06-2013, 12:06 PM)rogerwilco Wrote: [ -> ] (09-06-2013, 11:32 AM)CityFarmer Wrote: [ -> ]IMO, real estate is unlikely a "mother" of all financial crisis.
What about the 2008 US subprime mortgage crisis ?
First of all, for argument sake, 2008 crisis is just one crisis among the three discussed, so it is non-conclusive to say "mother of all".
Secondly, I will not relate the 2008 crisis with real estate, but with financial engineering and incentive model of bankers.
Hmm.. financial engineering helps to artifcially bring down financing property. Fueling housing bubble. . Is cheap financing that is the problem. . financial engineering is just a tool to get there. . As for incentive model of bankers.. another tool to sell the story to investors .the key here is cheap financing. .many has attribute causes of 2008 to various factors but I find cheap financing more digestable...
As for being the mother of all, that is my opinion la. ..
The 2008 financial crisis is never due to cheap financing? Subprime mortgage isn't a cheap financing, but an inferior in quality and expansive financing. Maybe I miss-understood?
Probably you are referring to future crisis x year later, if any...
Applicable to past, current and future.
By cheap financing, I mean risk is misprice ie. compensation of underlying risk is lower than what it should be. An asset can be inferior in quality (By inferior I debt serviceability is less ideal) but with the right reward, is still doable (think of our Ah Long!
). The abundance of liquidity in times of loose monetary environment means that such assets are attractive from yield standpoint, driving down the price of credit for such assets - this is what I meant by cheap financing. Understand your point of inferior quality and expansive but do consider if the sub-prime is price correctly at the onset (think Ah Long again!
), will the situation be different? That is why i attribute it to cheap financing...
Not surprise that we can have different opinions on what are the causes and if we look around, different literature attribute 2008 to various causes. I am sure we saw Alan Greenspan's name out there too..
Again, different people can have different interpretation and depending on what we read, we will attribute to different causes. But I still stick to my point that I find cheap financing more digestable explanation and contrary to your suggestive point of "never due to cheap financing", I think it has a big hand in the 2008 crisis..
On Present, do I see similarities? - my answer is yes.
On future, will it happen again? YES! because humans are forgetful..
If I may feedback, notice that you are the moderator here. I join this forum in the hope of sharing and through active discussion, learn something along the way...But if we are to "close the door" on an opinion by saying or suggesting "never" as in your case, how can we expect to achieve the objective? As contributors, we are entitled to our viewpoints.. as readers, we can agree or not to but saying/suggesting "never", not too encouraging IMO, especially from the moderator..
Just my 2 cents worth. Peace..