Tuesday, March 18, 2008

It's not a recession . . .

A friend from the capital markets who chooses to remain anonymous has suggested a new name for the current economic travails of those markets and the economy. It is not a recession, it is a subsidence.

Works for me. What do you think? Check out this definition in Wikipedia. And here is the geological version, as seen in this satellite map of Houston, caused by overextraction of groundwater. In the current economic case, greed-induced overextension of credit to unqualified investors began the cycle. Now, levels of liquidity fall and cause us to realize that the foundations of our capital markets depend on trust and principles that are easily damaged and that will take time and hardship to restore.

1 comment:

pesha said...

How apt that Houston is the example of subsidence caused by overextraction.