‘Systemic risk’ translates to “Bubble”


We just need a little more information and then we will understand!!!

Inquiring minds are reading an article showing how systemic risks are related to bubbles:

Americans might be counting on the day when home and retirement-fund values start to rise again, but anyone expecting to benefit from a future boom in prices should take note: Economic policymakers around the world are looking for ways to make sure that doesn’t happen, or at least not with such intensity that it risks the kind of bust that usually follows.

Those intrepid folks who brought the world a seemingly never ending stream of bubbles are trying to understand them:

In studying how to respond to the recent crisis and create a more stable system, central bankers, international officials and others have been focusing on a concept known as “systemic risk.” That’s the type of falling-domino problem that allowed mortgage defaults in the United States to lock up the global financial system because of the complex connections among banks, investment companies, insurers and other firms around the world.

But even with all the recent history, the next line (and succeeding paragraph) is surprising:

The phenomenon is not fully understood.

“We sort of know vaguely what systemic risk is and what factors might relate to it. But to argue that it is a well-developed science at this point is overstating the fact,” said Raghuram Rajan, a former International Monetary Fund chief economist and author of “Fault Lines,” which explored the role of U.S. real estate and credit bubbles in the crisis.

It is a very interesting article. Especially when viewed with the gimlet eye of skepticism.

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