Financial Bubbles, Real Estate Bubbles, Derivative Bubbles, and the Financial and Economic Crisis
published: July 10, 2009, recorded: June 2009, views: 3100
Report a problem or upload filesIf you have found a problem with this lecture or would like to send us extra material, articles, exercises, etc., please use our ticket system to describe your request and upload the data.
Enter your e-mail into the 'Cc' field, and we will keep you updated with your request's status.
The financial crisis of 2008, which started with an initially well-defined epicenter focused on mortgage backed securities (MBS), has been cascading into a global economic recession, whose increasing severity and uncertain duration had led and is continuing to lead to massive losses and damage for billions of people. Heavy central bank interventions and government spending programs have been launched worldwide and especially in the USA and Europe, in the hope to unfreeze credit and boltster consumption. Here, I present evidence and articulate a general framework that allows one to diagnose the fundamental cause of the unfolding financial and economic crisis: the accumulation of several bubbles and their interplay and mutual reinforcement has led to an illusion of a perpetual money machine allowing financial institutions to extract wealth from an unsustainable artificial process. Taking stock of this diagnostic, I conclude that many of the intervention to address the so-called liquidity crisis and to encouragemore consumption are ill-advised and even dangerous, given the lack of precautionary reserves that have been unaccumulated in the good times and the huge liabilities. The most interesting presents times constitute unique opportunities but also great challenges, for which I offer a few recommendations.
Link this pageWould you like to put a link to this lecture on your homepage?
Go ahead! Copy the HTML snippet !