We know this because it told readers today that, "the credit crisis also has stuck around much longer than expected." This is not true. Economists who understand the economy knew that the credit crisis was far from over back in March, when many ill-informed analysts proclaimed the end of the crisis. It was easy to see that the crisis was not over because the fundamental problem was the collapse of the housing bubble which was and is leading to record foreclosure rates on mortgages. With hundreds of billions of dollars of losses on mortgages, it was inevitable that there would be serious problems for those holding mortgages and mortgage backed securities and their derivatives. Furthermore, the glut of housing guaranteed loses for builders and defaults on construction loans. With the overbuilding also in the commercial sector, there will be another source of bad loans. In addition, since housing equity was a general fallback for consumers on other loans, such as student loans, credit card debt, and car loans, the loss of equity guaranteed higher default rates on these loans as well. This situation is of course worsened by the job loss that began in December. This is why serious economists knew that the credit crisis was not over in March.
--Dean Baker
