As was written in 1986: ‘The problem is not just the personal, corporate and bank leverage nor just the unprecedented national debt, current account and trade deficits but with the addition of the huge unfunded liabilities it takes only a small trigger to get the whole economy to collapse.’ The leaders of both Parties in both Congress and the Administration and the Federal Reserve Bank failed to see this intellectually obvious, economic crisis coming. After the economic crisis hit them, they all recognized and now confirm that it was excessive leverage, i.e. the ratio of the debt relative to the equity, that was the problem.
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