Head-spinning in its complexity

JP: Good read from World Magazine.

Anatomy of a crisis


The current financial crisis gripping Wall Street is head-spinning in its complexity. But economists and analysts have been able to identify several steps along the way that helped lead the country to where it stood last week, on the brink of a massive government program to buy hundreds of billions worth of bad mortgages.


The fundamental dynamic is this: Washington and Wall Street helped people buy houses they could not afford on such a massive scale that simply letting the lenders and debtors take their lumps would arguably do grave harm to the economy. They will take some lumps (Wall Street isn’t exactly a hot job market right now), but most of the losses will be “socialized,” or spread out among everyone who pays taxes. This includes those who exercised restraint during the bubble.

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