by Pater Tenebrarum
On August 8, Deutsche Bank’s Jim Reid penned a piece reminiscing about the past five years, in which he argues that it was in August 2007 when the financial world finally began to appreciate that something was about to go horribly wrong. Readers may recall that August 2007 was when the ECB provided its first emergency liquidity injections (back then a relatively tame €95 billion). Reid has therefore chosen this point in time as the starting point of the crisis, although we would argue that the real starting point was probably late February 2007, when the first sub-prime lenders went to the wall. One could even say that the BoJ’s decision to lower Japan’s monetary base by about 25% in one fell swoop in the summer of 2006 was what triggered the crisis, as it rooughly coincided with the price peak of the US real estate bubble.