Lehman Brothers’ death did not cause the great recession of 2008.
An extensive body of scholarly work has examined the choices made in an interconnected economy, and concluded that despite the fact that Lehman loved leverage, at heart was the fact that investors were simply unaware of the opaque nature of risk they had taken on in their pursuit of such effortless wealth. In an age of abundance, where ‘scarcity economics’ is rapidly losing its explanatory power, there is always the allure to slip into new modes of thinking, which somehow defy the economics of gravity. Whilst the latest issue of the ‘Economist’ has called the current real estate market a ‘super-cycle’, the reasons to explain this sound eerily familiar to when the same magazine famously claimed that oil would forever trade in the single digits in the late 1990s.
