Friday, January 25, 2008

The speed of adjustment

The late Rudi Dornbusch, used to say there's one thing to understand about economics and finance -- things always happen slower than you think they will, and then when they happen they happen faster than you can imagine they would. 

I came across this quote last night and I think it fits well for the current environment. The credit crisis began in August. The housing markets peaked over a year before that, yet ere we are in early 2008 discussing recession. The focus and changing expectations have really focused with the equity declines since the beginning of the year, so we are now entering the second phase of this process. The market is fully aware of current conditions and economies are adapting both with new policies and with changes in behavior. We will have to see whether this is too early or late. Unfortunately, events are happening faster then we can imagine.

No comments: