> Financial wealth is always an "illusion" under capitalism - when
> there's a crash and when there isn't a crash. So how can it explain
> this crash?
The "illusions" played the psychological role of "lulling" "disquietude".
They are, however, "illusions", i.e. denials of reality.
If the article from Wired posted recently by Charles is correct, one particular "illusion" that played a significant role in creating the current crisis was the "formula" - "a Gaussian copula function" - used to "hide" the actual risk (we're not dealing with "uncertainty" in Keynes's sense here) - the practical certainty - of default on many of the mortgages bundled together in mortgage backed securities.
When the realithy of defaults weakened the "the higherr more precarious" defense against anxiety provided by this "formular", the defense broke down and the "regressive" substitution for it of the "conventional or instinctive" "feeling about money" "that "operates, so to speak, at a deeper level of our motivation" generated the liquidity crisis
"partly on reasonable and partly on instinctive grounds, our desire to hold money as a store of wealth is a barometer of the degree of our distrust of our own calculations and conventions concerning the future. Even though this feeling about money is itself conventional or instinctive, it operates, so to speak, at a deeper level of our motivation. It takes charge at the moments when the higher, more precarious conventions have weakened. The possession of actual money lulls our disquietude; and the premium which we require to make us part with money is the measure of the degree of our disquietude." (Collected Writings, vol. XIV, p. 116)
Ted