I’m no expert of financial markets (way too boring), BUT it seems to me that the current crisis was triggered by the bursting mortgage industry bubble. I personally know several individuals who heavily invested in real estate a couple of years back, in the hope that “this market never goes down”. Some of these people used “novel” financial instruments such as zero-down, adjustable-rate interest-only mortgages to finance their purchases. Other individuals repeatedly refinanced their existing property, increasing their debt load under more and more burdensome interest payments. Risky business.
Best of all, our master problem solver, President Bush, has now decided to get involved. Everybody feels better already.
In light my first hand experience it seems to me that the explanation given in this post for the current financial mess makes the most sense. Notice that the presumed experts on economic matters, Republican and Conservatives, get most of the blame for the current mess.
For an excellent summary and timeline of recent events there is this Freakonomics post.
