http://www.voxeu.org/index.php?q=node/3385
From the article I have read, it came to my attention that the root cause of the previous financial crisis in the US has been that of too much leverage from financial institutions. The lack of proper oversight from authorities/regulators perpetuated to the crisis. This in turn turned in to a “bad debts arena” whereby assets were no longer performing and they had to be declared as Non-performing Loans (NPL). Also importantly is the fact that US consumers over the past 10 years had fallen into the habit of borrowing to spend and when the economy was faced with this epidemic it was all too late, as US households had little, if not negative, saving rates.
Very nice - this should be required reading for anybody thinking that the crisis will be short. The policies implemented now do not deal in any fundamental way with the problem of non-performing assets in the financial sector. To check a possible way out, look instead at the Swedish experience: nice discussion here
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