Continuing With The Insanity | Humanity’s Test.
During the peak of the financial crisis during 2008 and 2009, there was a window of opportunity for a fundamental remaking and realignment of the massively over-sized and dysfunctional global financial system. Perhaps, also a questioning of the consensus that supports general deregulation and globalization. This opportunity was not taken, and instead the status quo was supported. Now, five years later, the insanity continues. Just a few stories from a single issue of the Financial Times (October 28th, 2014) pay testament to this ….
Rebound in sales of risky assets raises fears over quantitative easing’s legacy
In the financial crisis the risky assets were subprime housing loans (retail loans to borrowers with very low credit scores) bundled together and securitized (turned into bonds and other financial instruments that could be sold to investors). The new risky assets of choice are subprime car loans, and junk-rated corporate (companies with low credit ratings) bonds. In the United States, the issuance of sub-prime car loan securitizations has grown rapidly from its nadir during the crisis, and may surpass its pre-crisis peak this year. Investors are taking on more risks to gain what they see as an acceptable return, in a low interest rate environment, just as they did pre-crisis. The overall issuance of securitized assets is still significantly below pre-crisis levels, but its current rapid growth shows how little the crisis changed things.
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