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REUTERS A Hedge Fund Titan's Theory of the Economy  |  Ray Dalio, the head of the hedge fund giant Bridgewater Associates, explains his view of credit cycles in a 30-minute instructional video.

"We are looking with great intensity at current developments to see if what we do makes a difference from the point of view of credit to the real economy," Mr. Draghi said.

Based partly on this experience, he advocates a narrower view of credit's origins and a more discriminating view of its purposes.

This is the heart of the current sub-prime mortgage troubles, and here is a simplified view of credit companies rationale for issuing sub-prime loans to under qualified buyers.

Similar(56)

We are no longer simply facing a debt crisis, concerned only with market confidence or the views of credit rating agencies.

The positive effect of loan interest rates on private sector credit confirms traditional supply-side views of credit markets (McKinnon,1973; Shaw, 1973) that attract deposits and allow banks to expand credit.

View image of (Credit: Thinkstock).

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Avinash Persaud of Intelligence Capital, a consultancy, draws a distinction between potential "risk absorbers" such as insurers, pension funds and banks themselves, who are able to take a long-term view of the credit and hang on to it even if the price falls, and "risk traders", whose views of the credit are driven by the current price.

An iPhone is like a take on Josef Albers's Homage to the Square, while a rear view of a credit card waiting to be signed, with its horizontal black strip and the elongated white rectangle below, has the feel of certain Ad Reinhardt paintings or a Rothko.

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