Since 2007, the world has worried about defaults. More accurately, the worry began in the summer of 2007, when Bear Stearns announced losses of a couple billion dollars from trouble in their hedge funds. They assured investors that the situation was under control.
Lessons learned during these past four years highlight defaults, meltdowns, and all the other aspects tied to these crises. Lehman-AIG has become the metaphor. The US policy responses of TARP, QE1 and QE2, Dodd-Frank, and now Operation Twist top a list of many government attempts to thwart another Lehman waterfall.
Let’s survey the landscape.
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