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).

When this increase in prices occur, reasonably, people assume that it is a good investment, they see a business opportunity and get loans. As a result, the loans are also inflated.

What is difficult to express is at what moment do the investors or economic agents realize that there is a bubble. My hypothesis is...

More on this topic

No Latin American country will be saved from crisis

October 2008

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.

Daboub, ex minister of Economy for El Salvador, will be in Panama next week and in his country of origin, where he will participate in the Ibero-American Summit.

The market must solve the financial crisis

October 2008

Four economists conclude that the market must fix itself in order to solve the financial crisis in the United States.

In the round table organized by the Academy of Central America, the economists Juan Muñoz, Eduardo Lizano, Isaac Castro, and Jorge Guardia shared their assessment of the causes and possible solutions for the crisis that began with the fall of property prices in the United States.

Hard economic times may just be starting

October 2008

The finantial crisis in USA will especially hurt Mexico and Central America, whose economies are closely tied to the U.S. market.

Don't be fooled by the universal sigh of relief that was heard Friday when the U.S. Congress approved a $700 billion package to rescue the U.S. banking system.

The financial crisis: the inevitable adjustment

October 2008

When the true economic value is too far from the fabulous figures invented by financial engineering, crisis - and an adjustment - is inevitable.

Cristóbal Perez-Jerez Alvarado, MBA in international economics, analyzes, with the very much needed academic indifference of today (and also the very scarce common sense), the current financial crisis.

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