Sunday, February 08, 2009

Asymmetry of Expansion and Contraction

Expansion and leverage take place on the basis of assets; contraction and de-leveraging, however, take place by institution and market. The process is relatively smooth and incremental in expansion, but sticky and punctuated in contraction as institutions fail. The asymmetry is a function of the legal regime. Is the asymmetry correctly priced by the financial markets in assets and by the markets in institutional control? I wonder.

1 comment:

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