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Causes of the economic crisis: Can the flap of a butterfly wing in Brazil destroy the Coliseum … after 30 years?

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  • Szegö, Giorgio

Abstract

The current US-made economic crisis was caused by unintended perverse consequences of remote well-meaning political decisions, such as the 1977 Community Reinvestment Act and the demagogic exploitation of government-sponsored enterprises (GSEs) such as Fannie Mae etc that began in the 1990s. The fivefold interest rate increases in the USA between 2003 and 2008 that charged an additional US$70bn to the three million holders of adjustable rate mortgages (ARMs) triggered the crash.

Suggested Citation

  • Szegö, Giorgio, 2011. "Causes of the economic crisis: Can the flap of a butterfly wing in Brazil destroy the Coliseum … after 30 years?," Journal of Risk Management in Financial Institutions, Henry Stewart Publications, vol. 4(3), pages 216-228, June.
    • Handle: RePEc:aza:rmfi00:y:2011:v:4:i:3:p:216-228
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    More about this item

    Keywords

    adjustable rate mortgages; US Federal Funds; financial crisis;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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