From the frozen lands of Norway’s Arctic Circle to the hot sands of the Middle East and the booming metropolis of Shanghai the losses from America’s subprime crisis are popping up around the world like angry whac-a-moles. The losses are large and appear larger by being found in the most unexpected of places. Today the focus is on these world-wide losses but I think future historians will focus on how the crisis demonstrated to everyone the power of integrated capital markets to diversify risk.
The losses, of course, are regrettable and the desire to find and apportion blame for the crisis among investors, home buyers, mortgage brokers, credit analysts and regulators is understandable. We should and will learn lessons. And yet, despite problems with transparency one of those lessons ought to be that the crisis would have been worse if the losses had been more concentrated.
From this perspective, world-wide losses are perhaps the best losses of all.