Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Here you go. These charts are in Leveraged Losses: Lessons from the Mortgage Market Meltdown presented to the US Monetary Policy Forum Conference, released February 29, 2008. See the report for a brief description of what you're looking at in each chart. But it is very clear that something in the financial system went sproinnnggg in July-August 2007.

I think what it all reflects is that whenever you let the financial and monetary system leave the real economy behind by running off and doing its own thing - speculating, creating and trading "risk management", speculating some more, trading for its own accounts, arbitraging the "noise" in the markets, etc. - you end up with a financial and banking crisis. Because any and all financial instruments must, in the final analysis, be paid for from the physical production of the real economy. Think of financial instruments as claims for payment. When there is a roughly 1.5 to 1 ratio, things are relatively sane. But when you get to where we are today, where there are $60 in claims of payment to every $1 in GDP, there is bound to be a "hiccup."

by NBBooks on Wed Mar 5th, 2008 at 10:06:49 AM EST
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