Now that some of the vague-but-panicked headlines have started to pass, we’re starting to learn what happened in the trenches to allow the market to go whacky. I’m not a huge math fan, being not-so-great at it, but I appreciate a good analysis, and this is a good analysis of one aspect of the mortgage problem.
The feedback loop got too long. And as John Maynard Keynes said, “The market can stay irrational longer than you can stay solvent” – there’s a terrific incentive to ignore your better knowledge and forge on ahead.