By James Park
In October 2008, the flow of money stopped. As Lehman Brothers teetered on bankruptcy, the US financial system went into septic shock – from toxic assets representing worthless derivatives and collateralised debt obligations. To capture the gravity of the situation, the media latched onto metaphors. Warren Buffett called that October the economic equivalent of a Pearl Harbor.
While Buffet’s martial analogy serves to highlight the fall in the inter-institutional lending, a more apropos analogy is that the financial system found itself in the intensive care unit with the diagnosis of septic shock.