Analysis of 2008 Collapse Shows Economy Networked for Failure
Monday, 28 March, 2011 Leave a comment
This is an interesting analysis of SOME elements of the growth of inter-connectedness. But if you want to view the big picture in a more easily understood, “user friendly”, format you may want to follow this link (click on the logo) :
In this White Paper we showcase the crisis anticipation capabilities we, at Ontonix, have developed and deliver using our unique OnstoSpace technology – by analysing macro data from the US Economy Property for the period period between 2004 and 2007.
Economists have pointed to financial industry entanglement with the entire U.S. economy as a crucial factor in the 2008 collapse, but Bar-Yam’s team drives the point home with new clarity.
In a study, published November 16 on arXiv.org, the researchers used network-mapping tools to analyse the relationships between 500 corporations with the highest stock-trading volume. These were linked to oil prices, bond prices and interest rates.
From this analysis came two striking figures. The first is a map (below) of links between companies in five key economic sectors: technology, oil, other basic materials, finance linked to real estate and other finance. As of 2003, the sectors are relatively distinct, with real estate isolated. By 2008, they’re a tightly linked jumble, with finance at the centre.
Visualization of market linkage change from 2003 to 2008 in technology (blue), oil (dark grey), other basic materials (light grey), finance including real estate (dark green) and other finance (light green).