Now that’s what I call a stress test
This post was written by Kevin O’Rourke
HT Calculated Risk
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on Thursday, August 5th, 2010 at 8:44 am and is filed under Banking Crisis, World Economy.
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August 5th, 2010 at 11:24 am
The follow-on link to a WSJ article is also informative. I was one of many analysts complaining about the assumed modest property price declines in the stress test, and I used Ireland as an example. Ireland was far from the worst — some of the other countries had even less appropriate “worst case” scenario forecasts for property prices - particularly Greece - and this affected the results of the test quite dramatically.
http://online.wsj.com/article/SB10001424052748704719104575389251817348376.html
August 5th, 2010 at 11:55 pm
Looks like Jim Chanos will soon be a very rich man with his short bet on Chinese real estate and related assets.
August 6th, 2010 at 5:12 pm
But as Matthew Yglesias points out a 60% decline isn’t such a dramatic scenario where a 68% increase has happened the year before:
http://yglesias.thinkprogress.org/2010/08/chinese-regulators-tell-banks-to-prepare-for-home-price-declines-of-as-much-as-60-percent/