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The crisis, the chicken and the egg

By Luis Arroyo, in Madrid | The great cause of the financial crisis was the spreading of risk through previously unknown channels. New financial instruments were invented, ‘collateralized’ with original assets and loans (mortgages), and sold and resold to re-lend the proceeds of the sale. The standardization of the process, despite its darkness, made it easier to hide the risk to the rest of the world. The initial risk was…