Primary Causes of the 2008 Crash

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Primary Causes of the Crash:

  1. Invention of New Types of Derivatives
  2. Complexity of Derivatives (Intentional?)
  3. Lack of Transparency
  4. Lack of Regulation of OTC Derivatives
  5. Artificially Low Interest Rates Stimulates Excessive Lending
  6. Management Determines Value (on books) of Many Complex Derivatives when models don't work


Notes

In 2003, and for 31 months, the federal funds rate was 1%, the lowest in 50 years, and the base inflation-adjusted short term interest rate was negative. Translation: for bankers, money was free. (Source: "Trillion Dollar Meltdown," by Charles R. Morris)

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