It’s beginning to look like we’re caught in an unfolding nightmare. And what’s making it worse is that no one seems to know how far into it we are, how long it’s going to last and how battered we’re going to be in the course of it.
I’m referring, of course, to our economy, which has seemingly hurtled in its descent like some mad downhill racer.
First, when the subprime bubble burst, the consensus was that this was containable and wouldn’t affect much more than that particular sector. Wrong.
As major banks and investment banks started taking massive hits due to their exposure, a couple of things became clear. One is that they had no idea what they had gotten into and, second, no one had any idea of how deep and far-reaching were the tentacles of this debacle.
Soon credit started drying up. Hedge funds (those marvelously unregulated safeguarders of our financial system) started going belly up, and nations like Dubai and Singapore started owning stakes in American icons like Citigroup and Merrill Lynch. But that’s the extent of it, the economists said. Wrong.
Now it’s not only the subprime market that has disintegrated, but also creditworthy mortgage owners are going into foreclosure at an accelerating pace. Good risks are more and more at risk.
But even so, the economists said, the tanking housing market is controllable and won’t spin the economy into recession. Wrong.
But even if we go into a recession, the economists said, it’s likely to be short and not terribly severe. Wrong.