While the economy was still very hot most of the 2007 is quickly went into fast destruction mode just in few months. I’ve posted few days ago about Minsky theory and I just want to add few datapoints.

I think that the main locomotive of this Ponzi credit bubble inflation was a double-bubble process: real estate bubble and M&A bubble. I will loosely define the most spectacular phases of the real estate bubble as Q1’03-Q4’05 and M&A bubble as Q1’05-Q2’07.

I would also use the quarterly growth of corporate earnings as the simple and reliable indicator of economic health:

  • Q1’06 +15% <– real estate bubble starts deflating
  • Q2’6 +13%
  • Q3’06 +30% <– M&A activity exceeded the 2000 level
  • Q4’06 +27%
  • Q1’07 +10% <– collapse of 50 mortgage lenders, jump in subprime interest rates
  • Q2’07 +14% <– M&A activity reached unprecedented levels, but real estate is getting worse
  • Q3’07 -24% <– M&A bubble burst and subprime lending halted
  • Q4’07 -43% ….