Financial Bubbles, Real Estate Bubbles, Derivative Bubbles, and the Financial and Economic Crisis

author: Didier Sornette, Department of Management, Technology, and Economics, ETH Zurich
published: July 10, 2009,   recorded: June 2009,   views: 20366

Related Open Educational Resources

Related content

Report a problem or upload files

If 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.
Lecture popularity: You need to login to cast your vote.


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 page

Would you like to put a link to this lecture on your homepage?
Go ahead! Copy the HTML snippet !

Reviews and comments:

Comment1 tf, June 27, 2010 at 11:15 a.m.:

- video ends prematurely
- most slides are impossible to read

Write your own review or comment:

make sure you have javascript enabled or clear this field: