What just happened?

The recent financial crisis seemingly appeared out of nowhere with even eminent economists in the dark about the ensuing catastrophe.  Despite a plethora of academic research across the economic spectrum, we all ‘bubbled’ along until the financial tsunami struck, with not even as much as our armbands at the ready!  This raises a number of questions, but perhaps most pertinent – what just happened?

To answer this question I believe we need to look at the bigger picture – capitalism to be precise.  Prominent economist Paul Krugman (2009) affords recognition to a general system failure commenting, “belief in efficient financial markets blinded many, if not most, economists to the emergence of the biggest financial bubble in history” (full article can be found here).  By examining the broader political economy it may be possible to discern whether capitalism is a precursor to crises, or whether specific market instruments or institutions are instead culpable.

The remainder of this blog is devoted to assessing the role of capitalism in financial crises, past and present.  Please feel free to add your own thoughts and opinions.