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As the graph below shows, the financial crisis appears to be almost 2 years old now, with CDOs emissions stopping growing brutally duing the winter of 2007, and collapsing during the summer. This was followed by the rating downgrades, suggesting that rating agencies have simply been observers ex post rather than analysts ex ante of problems:

The results were visible in the bank losses (starting in third quarter 2007 numbers), and in things like bonus payments (already down in 2007 compared to 2006) and hedge fund assets (down only starting in 2008):

The impact on the "real economy" came in the second half of 2008, in the form of job losses (accelerating in the fourth quarter), and a brutal change in the long term trend towards more debt and lower savings rates:

But, in fact, it took about 3 years (or even 4, if you look at the NAR index) from the actual trigger event: the top of the US housing market:

The housing bubble underpinned a whole mountain of spending, flattering growth numbers, and was built on the illusion of another mountain of (bad) debt, which was already crumbling in 2005, before turning into an increasingly appalling (and injustifiable by any measure) disaster zone for the banks :

The most striking element is that financial markets needed a year to react to the top of the market being visible - and that, of course, after several years of numerous observers screaming that the asset price increases were absolutely unsustainable (and unprecedented) - and that it took yet another year for that to trickle back to the very home owners that got caught in the housing bubble in the first place.

And politicians all along saw nothing, and did nothing, until it was too late.

Of course, it could be argued that they were complicit - in fact that they actively promoted the whole scheme, which can easily be dated to 1980:

Originally posted to Jerome a Paris on Thu Feb 12, 2009 at 01:26 PM PST.

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