The anchor in the storm

Understanding the root cause of the credit crisis is imperative if we are to avoid making the same mistakes again

As the liquidity, credit and financial crises roll into their third year, investors and policy makers alike are understandably more concerned about how to get out of this mess rather than recognising how we got into it in the first place. But we need to understand the root cause of the problem so that we do not repeat the same mistakes in the future. This is even more important for bond investors. We need to know which parts of the credit markets are likely to recover more quickly, and which parts may never recover at all. The sub-prime mortgage market or large financial institutions are ...