Why has this crisis occurred?
The current financial crisis demonstrates how powerful and decisive the expectations of investors and the economic agents in general can be.
Wednesday, October 1, 2008
Expectations created a bubble in the prices of homes and properties in the US. By bubble I mean a price established mainly due to optimism (which can be irrational - even though there is experimental evidence that bubbles can be created when all the investors are rational - Vernon Smith).
The financial crisis will affect all Latin American countries, despite the fact that they are better position than in the past to withstand it, said Juan Jose Daboub, general director of the World Bank.
Four economists conclude that the market must fix itself in order to solve the financial crisis in the United States.
The finantial crisis in USA will especially hurt Mexico and Central America, whose economies are closely tied to the U.S. market.
When the true economic value is too far from the fabulous figures invented by financial engineering, crisis - and an adjustment - is inevitable.
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