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The Formula That Killed Wall Street
We recently discussed the perspective that the harrowing of Wall Street was caused by over-reliance on computer models that produced a single number to characterize risk. Wired has a piece profiling David X. Li, the quant behind the formula that enabled the creation of such simple risk models. "For five years, Li's formula, known as a Gaussian copula function, looked like an unambiguously positive breakthrough, a piece of financial technology that allowed hugely complex risks to be modeled with more ease and accuracy than ever before. With his brilliant spark of mathematical legerdemain, Li made it possible for traders to sell vast quantities of new securities, expanding financial markets to unimaginable levels. His method was adopted by everybody from bond investors and Wall Street banks to ratings agencies and regulators. ... [T]he real danger was created not because any given trader adopted it but because every trader did. In financial markets, everybody doing the same thing is the classic recipe for a bubble and inevitable bust."
You didn't LOOK at the graph, did you? That's my citation.
This is the last 2 years, with that "almost completely VERTICAL" drop.
This is a 2 year span at 1929, that little tiny blip on the left of your zoomed out chart. Notice how it's actually more vertical than the current drop?
This is your chart, redrawn to have a log scale vertical axis instead of linear. It looks like "now" is roughly comparable to 1938 or the early 1970s.
Maybe you should get the facts before opening your mouth. Less than 5% of the mortages failed.
The banks however over extended themselves with the hope of using future profit to pay past due debt. Think of it this way. Balance your budget so you can pay all your bills. Now go max out your credit cards, take a second mortage and buy a couple more cars. Does it make sense? If so you have a future in banking, or government.
i thought once I was found, but it was only a dream.
Might want to check your numbers again. Bush ran up more debt that every President before him COMBINED. He came in with around $4 Trillion in debt and left with around $12 Trillion in debt. Obama has a long ways to go before he gets into Bush territory. In what fucking fantasy land did Iraq and Afghanistan cost $100 Billion? Shit we flew $125 Billion in cash in on pallets to hand out to contractors, most of that money is completely unaccounted for.