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The Blind Monks and the Elephant: Contrasting Narratives of Financial Crisis

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  • Marcus Miller
  • Songklod Rastapana
  • Lei Zhang

Abstract

We explore three persuasive narratives of the US subprime crisis. First the role played by pecuniary externalities in amplifying shocks to the quality of risk‐assets held by Investment Banks; second is adverse selection in marketing these assets; and third is financial panic. Their relevance is attested by the emergency support provided by the US Federal Reserve Bank and Treasury; and by subsequent findings in courts of law. While these contrasting narratives illuminate different aspects of the crisis, we conclude it was because they all had a part to play that the US financial system was so exposed to radical failure.

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  • Marcus Miller & Songklod Rastapana & Lei Zhang, 2018. "The Blind Monks and the Elephant: Contrasting Narratives of Financial Crisis," Manchester School, University of Manchester, vol. 86(S1), pages 83-109, September.
    • Handle: RePEc:bla:manchs:v:86:y:2018:i:s1:p:83-109
    DOI: 10.1111/manc.12236
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    Cited by:

    1. Marcus Miller, 2021. "Choosing the Narrative: the Shadow Banking Crisis in Light of Covid," Open Economies Review, Springer, vol. 32(2), pages 291-310, April.
    2. Miller, Marcus & Zhang, Lei, 2019. "Externalities and financial crisis – enough to cause collapse?," The Warwick Economics Research Paper Series (TWERPS) 1207, University of Warwick, Department of Economics.

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