Trillions and trillions of dollars! Again, because of the sheer size of this stupidity I will find it hard to believe the economy doesn't at least slow down drastically.
The dislocation could have significant impact. However, it is important to remember that a loan does not by itself create wealth - it is a temporary transfer of possession. The failure to repay a loan does not destroy wealth - it is a transfer of that wealth.
So the subprime meltdown is a big wealth transfer from lenders/investors to borrowers (or to the parties to whom they spent the borrowed funds). The wealth is still out there somewhere.
The dislocation could have significant impact. However, it is important to remember that a loan does not by itself create wealth - it is a temporary transfer of possession. The failure to repay a loan does not destroy wealth - it is a transfer of that wealth.
ReplyDeleteSo the subprime meltdown is a big wealth transfer from lenders/investors to borrowers (or to the parties to whom they spent the borrowed funds). The wealth is still out there somewhere.