Why the crisis was inevitable

Discussion in 'Stocks' started by Rona1d, Apr 12, 2009.

  1. Rona1d


    To gain a grasp of past historical "recessions," i found an article from Aswath Damadoran's website: http://pages.stern.nyu.edu/~adamodar/New_Home_Page/articles/riskprem.htm It does an excellent job of highlighting key aspects of the most recent recessions such as the increase of risk premiums from investors, and the plunge in risk value expectations.

    A constantly reoccurring theme that i have noticed is the increase in risk premiums far beyond normal, in the midst of rising economies and such bubbles that were created from the Internet and rise in Junk Bonds versus U.S. treasuries.

    I believe that it is the ultimate goal of all governments to stabilize growth rates, so much as to prevent excessive growth rates of economies, as seen with the housing bubble. And governments should seriously focus on that idea for it is the catalyst for rising expectations from investors, leading to them ultimately disregarding risk.

    To get to the point, I would like to hear Elite trader's input on whether the aforementioned idea of forcibly stabilizing growth rates of economies is and should be the ultimate focus/goal of all economies.