Vilhelm S., companies and people who lose money on CDOs have mortgages to pay and employ people who have mortgages to pay… Once the system gets coupled like that, one unlucky bet can start the cascade. I’m not saying this actually happened, but it’s a mechanism which could falsify the assertion “the lack of correlation doesn’t stop being real just because people believe in it”.
Vilhelm S., companies and people who lose money on CDOs have mortgages to pay and employ people who have mortgages to pay… Once the system gets coupled like that, one unlucky bet can start the cascade. I’m not saying this actually happened, but it’s a mechanism which could falsify the assertion “the lack of correlation doesn’t stop being real just because people believe in it”.