Financial crisis 2007/8
I vividly remember the first time I was confronted with the effects of the financial markets. On student exchange in 2008 and 16 years old, I was experiencing a normal to most, but to me still unusual and exciting day in an American high school. Listening attentively (this was before I discovered amazingly that teachers let you take a nap in class, a blessing for an exchange student whose brain was going at 200 miles/hour every day, translating, adjusting, understanding) our teacher was telling us that he and his partner had purchased a big house that they did not need in terms of space and now could not sell since the housing market had collapsed. I was stunned. Many parameters were completely incomprehensible to me. I did not know the concept of buying a house as an investment, not for your family and providing stability, but with the sole purpose of selling it at a higher price. I also did not understand what would motivate such a decision – and how that decision and its rationale would be grounded in something so abstract as a financial market. What stunned me most was how my teacher’s life had been affected by these mechanisms and instruments, that seemed far away from everyone’s life around me – and that my teacher was speaking about this as if these abstract concepts were somehow logical.
Looking back at the story, I admire my teacher for the honesty and
What is this pattern of easing constraints before the structure of dependence has changed?
And every time policymakers choose to ease the constraints on the largest banks before the structure of dependence has changed, they answer it in practice anyway.