The most significant cause of the worst financial crisis the world has seen since the Great Depression,according to Prof. Siegel: Financial firms bought, held and insured large quantities of risky, mortgage related assets on borrowed money. Fiery high-risk rings lure reckless bankers. Such analysis is in clear evidence.
Explaining his theory further, Siegel pointed out that many troubled banks and insurers continued to prosper in almost every other aspect of their businesses right up to the 2008 meltdown.
The exception was the billions of dollars in mortgage-backed securities that they bought and held on to or insured even after UShome prices went into a free-fall more than two years ago.
Siegel said: "I am actually an optimist, I think by the second half of this year,things might turn around faster than people are now predicting."
According to Siegel,monetary policy has failed to stimulate the US economy. The viable solution open to American policy makers is Keynesian fiscal policy, a stimulus program that lowers taxes or increases government spending or both. Let us wait and see the results in the days to come.
I would recommend Manpower policy as I sent my last blog to such effect.
Francis Shieh a.k.a. Xie Shihao on Saturday,February 7,2009.
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