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I agree, but it's also worth noting that the 2008 crisis took a couple years to go from a problem to a full blown catastrophe. At the end of 2006 it was evident

by bnralt 4y ago

I agree, but it's also worth noting that the 2008 crisis took a couple years to go from a problem to a full blown catastrophe. At the end of 2006 it was evident there were problems with the sub-prime mortgage market. 2007 was interesting, as most people went along with their lives but you kept hearing about this growing problem that wouldn't go away. In 2008 people realized there was a lot of trouble but it was hard knowing exactly how much. The Fed bailed out Bear Stearns in March. It was in September of that year that they decided not to save the Lehman Brothers, which lead to the entire financial system melting down. At that point - two years later - it started to become clear to most people just how bad things were going to get (worth noting that this "RIP Good Times" presentation is from the end of 2008). To compare it to COVID - 2006 was like January 2020, 2007 was like February, 2008 was like March. So I agree with you that I don't _think_ we're anywhere close to the 2008 collapse. But catastrophes like that usually don't seem that way until you're at the point of no return.

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timr 4y ago
That crisis took years because it had to work its way through mortgage defaults, to the bonds, to CDOs. Each step takes a while to unfold. This is not the same mechanism at all. Rates have gone up and we're seeing a nearly instant reaction in the bond and stock markets. Speculation about a crash started essentially immediately after rates went up. There will certainly be overhang due to debt and VC and whatnot, but this is not the same as 2008. I think there's a better comparison to the dot-com crash, but even that analogy fails.
- bnralt 4y ago
  The thing is, most people had no clue about what the financial system had done in 2007. At the time it seemed like the housing market was going down (as housing markets do), and that there was a large amount of sub-prime foreclosures (which is why people were referring to it as the sub-prime crisis at the beginning), but there wasn't the sense that the entire financial system was about to fall apart. After the collapse there was a lot of talk about what the financial sector had been doing with things like mortgage backed securities and credit default swaps, but the average person wasn't aware of these things even as the crisis was unfolding. Again, I'm not saying that I think this is what we're facing at the moment. The point is that it can be hard to know when a big crash is happening, because there are often a lot of problems people are only aware of in hindsight.

by bnralt 4y ago

deleted 4y ago

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timr 4y ago

That crisis took years because it had to work its way through mortgage defaults, to the bonds, to CDOs. Each step takes a while to unfold. This is not the same mechanism at all. Rates have gone up and we're seeing a nearly instant reaction in the bond and stock markets. Speculation about a crash started essentially immediately after rates went up. There will certainly be overhang due to debt and VC and whatnot, but this is not the same as 2008. I think there's a better comparison to the dot-com crash, but even that analogy fails.

bnralt 4y ago
The thing is, most people had no clue about what the financial system had done in 2007. At the time it seemed like the housing market was going down (as housing markets do), and that there was a large amount of sub-prime foreclosures (which is why people were referring to it as the sub-prime crisis at the beginning), but there wasn't the sense that the entire financial system was about to fall apart. After the collapse there was a lot of talk about what the financial sector had been doing with things like mortgage backed securities and credit default swaps, but the average person wasn't aware of these things even as the crisis was unfolding. Again, I'm not saying that I think this is what we're facing at the moment. The point is that it can be hard to know when a big crash is happening, because there are often a lot of problems people are only aware of in hindsight.