22. Financial Gravity
In 2007, everyone discovered what Joseph Conrad knew: “[a civilized life is] a dangerous walk on a thin crust of barely cooled lava which at any moment might break and let the unwary sink into fiery depths.”1 The end arrived unexpectedly, reflecting author Alexander Pope’s description of the collapse of the 1720 South Sea Bubble: “Most people thought it wou’d come but no man prepar’d for it; no man consider’d it would come like a thief in the night, exactly as it happens in the case of death.”2
As interest rates increased from 1 percent to 5.25 percent per annum, reflecting higher oil and food prices, U.S. house prices stalled and then fell. Subprime mortgages predicated on low rates, rising house prices and ...