Talking about the recession
On one view, the BBC correspondent Robert Peston could be seen as carrying some responsibility for us all getting too excited about recession.
He has posted a thoughtful article on the BBC website (in PDF format) at
http://www.bbc.co.uk/blogs/thereporters/robertpeston/thenewcapitalism.pdf
He sees major global transitional problems in sorting out the current mess - caused by bingeing on too much borrowing (in his view).
Interestingly he sees small business as an oasis - one area which has not over-borrowed, in contrast to big businesses and individual consumers.
However small businesses cannot isolate themselves from the adverse effects of the over-borrowing of others.
If he is right, we are going to suffer the mother of all hangovers over the coming months, and we need to give some serious thought to fashioning a 'new capitalism' for the post-binge age!
David
Why?
When Robert Peston says:
"The trigger of the closing down of wholesale markets was the horrifying realisation by financial institutions in every country that hundreds of billions of dollars lent to US home-owners in the form of low quality sub prime loans – and repackaged into putatively high quality investments as collateralised debt obligations – were going bad."
My understanding is that sub prime home owners in the US did something strange. Instead of defaulting on unsecured loans they opted to default on secured loans tied to their properties.
I have not seen any academic studies on this and its worrying because the same mechanism may come into play here if the dynamics are the same.