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What caused the credit crisis? What will end the credit crisis? What will restore credit markets to normal functioning? This paper answers these three questions. There is of course no single cause of the credit crisis but this paper makes a very simple point about the chain of causation that has so far been largely overlooked. The current crisis has involved a systemic risk event in traded credit markets e.g. for mortgage backed securities or collateral loan obligations, not just the all too familiar tale of bank loan losses overwhelming the capital base of the banking system.
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