This was was essentially breaking down the unseen danger. While one particular issue might be “small”, the counter-party risk could be great. It could pull everything down with it. One country owns the debt of the others. Suddenly, someone else’s problems come around. That’s not good. Do you think systemic risk will be a major contributing factor to the events in the next crisis?
What interesting about the trillions upon trillions of dollars in the different markets around the world is that when fear takes hold, it tries to cram through a narrow exit all at the same time. That panic gets worse and worse, and the contagion spreads to assets thought to be sheltered from the issue at hand. Today, with complex derivatives which have become so pervasive, every single corporation and financial instrument can be wiped off the face of the earth in an instant.
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