My friend Sonia Arrison, host of Digital Dialog and Senior Fellow of Technology Studies at the Pacific Research Institute, has written an article in TechNewsWorld, Network Theory Can Explain US Credit Crunch, which discusses the chapter in my new book on using network and information theory to understand bubbles and market collapses.
Sonia’s has a deep understanding of communications and tech issues. Her technology columns are collected in Digital Dialogue: Technology, Capitalism, and the Pursuit of Freedom.
JR
That’s part of it … the other part would be offline-nodes filling in missing or incomplete information by virtue of their own experience and practises. Nobody trusts anybody because they knew what kind of junk they were cramming into into their own ABS/MBS/etc.
No, the Bankers are not lending because they now expect everyone to lie to them, much the same way they lied to each other and everyone else. It will stay that way until there is a credible means of value assessment and price discovery, and that is way off in the distance as long as the plan is to manipulate the markets away from true price-discovery.
And while it is quaint to think that the toxic assets have some residual value because they are backed by ‘real’ estate, the bankers know that a lot of the subprime stuff is sitting around boarded up in less than desirable neighbourhoods, where they are either being converted to crack-dens or burning down (or both) and that a lot of value has simply vaporised. And much of the Alt-A is now on fire-sale by soon to be unemployed yuppies who are finally realising that a short-sale is probably the best exit they are going to get in the coming months.