1 00:00:11,000 --> 00:00:20,000 Visit www.Starbet99.cc Trusted Secure Online Gambling Agent 2 00:00:15,883 --> 00:00:19,620 New Member Bonus 500 Thousand 10 Million Cashback Parlay 3 00:00:19,687 --> 00:00:21,455 Sbobet Sportsbook Rolls 1.25% Maxbet Sportsbook Rolls 1.5% 4 00:00:21,522 --> 00:00:23,891 Rolls Live Casino Sbobet 338A 1% Rollingan Casino Live Maxbet 1.2% 5 00:00:23,957 --> 00:00:26,827 BBM: 2C096C3F LINE: STARBET99 6 00:00:26,894 --> 00:00:31,065 Wechat: STARBET99 Whatsapp: +66875577610 7 00:00:31,132 --> 00:00:34,802 and never proven to be the case 8 00:00:34,868 --> 00:00:38,106 What happens is a crisis fades into memory 9 00:00:38,172 --> 00:00:40,241 and then become history. 10 00:00:41,109 --> 00:00:42,743 That is the reason we often give 11 00:00:42,810 --> 00:00:45,846 why we learn history and why we teach history 12 00:00:45,913 --> 00:00:50,684 is not having to repeat it past mistakes 13 00:00:50,751 --> 00:00:54,822 You have seen the state Union address where the President came and said, 14 00:00:54,888 --> 00:00:57,625 "Guys, we messed up." 15 00:00:57,691 --> 00:01:00,394 This is a boom and bust will always be with us 16 00:01:00,461 --> 00:01:03,164 It's human nature that they will be with us 17 00:01:05,266 --> 00:01:07,768 And I told you before, Mr. Deputy Chairman, 18 00:01:07,835 --> 00:01:09,937 "Don't go back to the boom and bust." 19 00:01:10,003 --> 00:01:11,672 (all cheering) 20 00:01:11,739 --> 00:01:13,874 (footsteps) 21 00:01:13,941 --> 00:01:17,178 Human strategy we see on the real market 22 00:01:17,245 --> 00:01:18,979 it's just that is evolutionarily really old 23 00:01:19,046 --> 00:01:22,383 They are a kind of residual strategy from 35 million years ago. 24 00:01:24,952 --> 00:01:26,820 WILLEM H. BUITER: Very difficult to, uh, 25 00:01:26,887 --> 00:01:28,822 understand why economists 26 00:01:28,889 --> 00:01:33,327 focus on the model where the crisis cannot happen 27 00:01:35,696 --> 00:01:39,533 They run the economy based on science fiction models. 28 00:01:39,600 --> 00:01:42,203 That's why they don't This crisis idea comes 29 00:01:42,270 --> 00:01:44,405 because they ignore banks, debts, and money. 30 00:01:45,439 --> 00:01:47,275 (hoof hoof) 31 00:01:49,743 --> 00:01:51,579 GEORGE MAGNUS: We always think How lucky we are 32 00:01:51,645 --> 00:01:55,483 that we never really have to live through in the 1929 accident 33 00:01:55,549 --> 00:01:57,318 and the 1930s Great depression, 34 00:01:57,385 --> 00:01:59,720 because we are now smart now 35 00:01:59,787 --> 00:02:02,590 and we know how to avoid it this type of accident, 36 00:02:02,656 --> 00:02:05,459 and actually, many economists 37 00:02:05,526 --> 00:02:08,862 really insist that the worst won't happen 38 00:02:08,929 --> 00:02:11,799 because we know how to handle these things. 39 00:02:11,865 --> 00:02:16,237 And of course, Actually, we don't know how to deal with them 40 00:02:16,304 --> 00:02:19,373 TERRY JONES: In 1928, President Calvin Coolidge 41 00:02:19,440 --> 00:02:21,809 give the country from Union 42 00:02:21,875 --> 00:02:23,844 address in the following terms: 43 00:02:23,911 --> 00:02:25,346 On the domestic field, 44 00:02:25,413 --> 00:02:27,348 there is peace 45 00:02:27,415 --> 00:02:29,217 and satisfaction... 46 00:02:29,283 --> 00:02:30,784 and highest record 47 00:02:30,851 --> 00:02:33,621 from years of prosperity, 48 00:02:33,687 --> 00:02:38,492 the great wealth created by our company and industry and saved by our economy, 49 00:02:38,559 --> 00:02:41,895 has a wide distribution _ among our own people Countries can assume now 50 00:02:41,962 --> 00:02:46,234 with satisfaction 51 00:02:46,300 --> 00:02:49,169 and anticipate the future 52 00:02:49,237 --> 00:02:50,971 with optimism. 53 00:02:51,038 --> 00:02:53,707 (everyone claps) 54 00:02:53,774 --> 00:02:55,643 (singing) 55 00:02:55,709 --> 00:02:57,545 TERRY JONES: He doesn't do it know what we know now, 56 00:03:02,182 --> 00:03:06,520 that the United States will almost suffer 57 00:03:06,587 --> 00:03:08,722 the worst economy disaster in its history. 58 00:03:08,789 --> 00:03:11,759 Our economy is healthy and strong, 59 00:03:11,825 --> 00:03:15,896 and grow faster than others large industrial countries. 60 00:03:23,604 --> 00:03:26,607 61 00:03:26,674 --> 00:03:30,644 62 00:03:33,347 --> 00:03:36,484 American people have changed to economic performance 63 00:03:36,550 --> 00:03:38,452 That's the envy of the world. 64 00:03:40,120 --> 00:03:42,523 TERRY JONES: He doesn't know what we know now, 65 00:03:42,590 --> 00:03:46,126 worst crisis ever to hit Western countries 66 00:03:46,193 --> 00:03:48,829 just around the corner. 67 00:03:51,031 --> 00:03:53,334 The crisis of 2008 68 00:03:53,401 --> 00:03:56,537 is often called as a subprime accident. 69 00:03:56,604 --> 00:04:00,474 In less than 15 years, there are big increases in mortgage loans to people 70 00:04:00,541 --> 00:04:02,676 who is basically can't afford it 71 00:04:02,743 --> 00:04:04,745 Women and men, Harvey Rosen, 72 00:04:04,812 --> 00:04:07,481 General Chair White House Council economic adviser 73 00:04:07,548 --> 00:04:10,183 speak in 2007 74 00:04:10,250 --> 00:04:12,953 75 00:04:13,020 --> 00:04:16,023 The main thing is innovation in the mortgage market 76 00:04:16,089 --> 00:04:18,626 has done more than the last 30 years is letting 77 00:04:18,692 --> 00:04:21,629 excluded, young, 78 00:04:21,695 --> 00:04:23,697 discrimination against, 79 00:04:23,764 --> 00:04:25,933 people without a lot of money in the bank 80 00:04:25,999 --> 00:04:27,701 to use a down payment. 81 00:04:27,768 --> 00:04:31,238 (muttering agreement and affirmation) 82 00:04:31,305 --> 00:04:35,576 JONES: These are careless loans to people who are unable to pay mortgages known as subprime loans, 83 00:04:35,643 --> 00:04:38,546 But banks insist 84 00:04:38,612 --> 00:04:40,247 they have eliminated the risk of with statistical processing 85 00:04:40,314 --> 00:04:44,652 If you look at the way risk is managed by the bank, 86 00:04:46,520 --> 00:04:48,589 especially before the crisis - 87 00:04:48,656 --> 00:04:50,023 88 00:04:50,090 --> 00:04:52,560 This is very interesting, and quite funny actually. 89 00:04:52,626 --> 00:04:54,795 What they do is to take risk assets, 90 00:04:54,862 --> 00:04:58,265 like, um, trash mortgage, 91 00:04:58,332 --> 00:04:59,867 cut them into small pieces, 92 00:04:59,933 --> 00:05:02,903 repackage them after mixing it with all the bits at risk, 93 00:05:02,970 --> 00:05:06,239 and then sell it to other banks and financial institutions. 94 00:05:06,306 --> 00:05:08,476 And so this risk becomes 95 00:05:08,542 --> 00:05:10,844 uh, disband in financial markets, 96 00:05:10,911 --> 00:05:13,681 and no one really knows where is the risk 97 00:05:13,747 --> 00:05:17,117 or in this case, does anyone know exactly whether... 98 00:05:17,184 --> 00:05:20,588 packages from financial products that he bought, 99 00:05:20,654 --> 00:05:23,090 that he invests, risks, 100 00:05:23,156 --> 00:05:26,093 whether it is very risky or not at risk at all. 101 00:05:26,159 --> 00:05:28,696 JONES: They sell this package to investors as a very low risk product. 102 00:05:28,762 --> 00:05:31,465 Indonesian banking organization all sizes have been made 103 00:05:31,532 --> 00:05:33,901 big steps the last two decades 104 00:05:33,967 --> 00:05:36,537 in their ability to measure and manage risk. 105 00:05:36,604 --> 00:05:39,507 So, because we can't observe the risk again, 106 00:05:39,573 --> 00:05:42,109 we say to ourselves, "There is no risk." 107 00:05:42,175 --> 00:05:44,745 What's worse? when you do this, 108 00:05:44,812 --> 00:05:46,780 the risk of being is connected to each other. 109 00:05:46,847 --> 00:05:48,882 110 00:05:48,949 --> 00:05:51,785 You don't know exactly how the risks are connected, 111 00:05:51,852 --> 00:05:53,120 but they are. 112 00:05:53,186 --> 00:05:56,089 In the pre-crisis period, 113 00:05:56,156 --> 00:05:57,958 we tell a story 114 00:05:58,025 --> 00:05:59,860 about big banks 115 00:05:59,927 --> 00:06:04,097 able to spread their risk on their balance sheet, 116 00:06:04,164 --> 00:06:07,267 which then 117 00:06:07,334 --> 00:06:09,537 allow us as regulators 118 00:06:09,603 --> 00:06:13,040 to allow them to run with a lower security margin. 119 00:06:13,106 --> 00:06:15,242 Everyone happy and confident 120 00:06:15,308 --> 00:06:18,812 that the mortgage market has become more efficient than before. 121 00:06:18,879 --> 00:06:21,449 And I told you before, Mr. Deputy Chairperson 122 00:06:21,515 --> 00:06:24,518 123 00:06:24,585 --> 00:06:27,888 do not return to boom and bust. 124 00:06:27,955 --> 00:06:32,025 and grow faster than others large industrial countries. 125 00:06:32,092 --> 00:06:34,127 Everyone is sure 126 00:06:34,194 --> 00:06:36,564 that at this time, This is different. 127 00:06:36,630 --> 00:06:40,233 ZVI BODIE: Subprime crisis in 2008 128 00:06:40,300 --> 00:06:43,704 basically a bubble burst 129 00:06:43,771 --> 00:06:46,740 They lend a lot of money to the house I've seen them in Gary, Indiana, in Detroit, Michigan, 130 00:06:46,807 --> 00:06:50,778 which you can now buy for ten grand 131 00:06:50,844 --> 00:06:53,881 But they will lend u-usually about one hundred thousand, 132 00:06:53,947 --> 00:06:57,384 so that poor people who want have never, ever had a house before being able to own a house. 133 00:06:57,451 --> 00:07:01,822 When we take your income and wealth, 134 00:07:01,889 --> 00:07:03,924 135 00:07:03,991 --> 00:07:06,627 You measure 620 on the FICO scale. 136 00:07:06,694 --> 00:07:08,496 620? it was great. 137 00:07:08,562 --> 00:07:11,665 No, no, no, no, no. You see, we're financial wizards takes into account 850 on good FICO scale. 138 00:07:11,732 --> 00:07:15,102 And 300 is very, very bad. 139 00:07:15,168 --> 00:07:18,539 You see, most people score around 725 on the FICO scale, 140 00:07:18,606 --> 00:07:22,576 and I'm afraid 620 is usually our cut-off point. 141 00:07:22,643 --> 00:07:26,313 Oh dear, so, I won't understand my interest in mortgages (laugh) Not so fast. 142 00:07:26,379 --> 00:07:29,783 You can still fulfill requirements for other income verified asset loans. 143 00:07:29,850 --> 00:07:31,585 What is that? 144 00:07:31,652 --> 00:07:35,523 145 00:07:35,589 --> 00:07:37,324 146 00:07:37,390 --> 00:07:40,994 That's where you declare your income and we verify your wealth 147 00:07:41,061 --> 00:07:42,930 Well, I'm worth a million dollars. 148 00:07:42,996 --> 00:07:44,297 Oh... 149 00:07:44,364 --> 00:07:45,633 Can you prove it? 150 00:07:45,699 --> 00:07:48,536 Not really. 151 00:07:48,602 --> 00:07:50,938 Look, we really want your money 152 00:07:51,004 --> 00:07:54,107 Uh-uh, I mean, we really want you to have this only mortgage interest 153 00:07:54,174 --> 00:07:57,678 So, we can go down stated income, the asset route mentioned 154 00:07:57,745 --> 00:07:59,312 What is that? 155 00:07:59,379 --> 00:08:03,350 You declare your income and assets and we don't check them 156 00:08:03,416 --> 00:08:05,018 Great! 157 00:08:07,120 --> 00:08:11,091 Well, uh, then - that's how are all signed and sealed. 158 00:08:11,158 --> 00:08:14,161 Believe it or not, this scene is or something like that, 159 00:08:14,227 --> 00:08:17,030 must have been played countless 160 00:08:17,097 --> 00:08:19,900 In 2004 to 2005, 161 00:08:19,967 --> 00:08:22,703 more than one third of all mortgages 162 00:08:22,770 --> 00:08:25,573 no income, no job or assets, 163 00:08:25,639 --> 00:08:27,641 nicknamed "Ninja loans." 164 00:08:27,708 --> 00:08:30,010 Hiyah! Hiyah! 165 00:08:31,378 --> 00:08:32,546 That's how it is. 166 00:08:32,613 --> 00:08:34,014 It's about forcing loans 167 00:08:34,081 --> 00:08:35,983 to people who will never reply, 168 00:08:36,049 --> 00:08:39,720 who will end get taken over, 169 00:08:39,787 --> 00:08:43,390 to get a fee on origination 170 00:08:43,456 --> 00:08:47,294 and other costs when they are sold to several suckers who will take the loss 171 00:08:47,360 --> 00:08:50,598 Broadly speaking becomes, finally, a little trick Because, everyone thinks asset prices will continue to rise. 172 00:08:50,664 --> 00:08:55,502 Unimaginable happens. 173 00:08:55,569 --> 00:08:58,939 Housing prices start falling 174 00:08:59,006 --> 00:09:01,474 That signals them they can never pay the debt, 175 00:09:01,541 --> 00:09:04,978 because they rely on on rising house prices 176 00:09:05,045 --> 00:09:07,414 as we all do in this bubble. 177 00:09:07,480 --> 00:09:08,882 And then, um, like a, dominoes, 178 00:09:08,949 --> 00:09:12,419 lenders who are very risky 179 00:09:12,485 --> 00:09:13,754 knock risky lenders, 180 00:09:13,821 --> 00:09:15,756 knock normal lender, 181 00:09:15,823 --> 00:09:17,791 and then they all fall apart 182 00:09:17,858 --> 00:09:20,861 183 00:09:27,668 --> 00:09:29,502 * Don't have a home * 184 00:09:29,569 --> 00:09:31,438 * Don't have shoes * 185 00:09:31,504 --> 00:09:33,807 * Don't have money * 186 00:09:33,874 --> 00:09:35,709 * Don't have a class * 187 00:09:35,776 --> 00:09:37,745 * Don't have a skirt * 188 00:09:37,811 --> 00:09:39,980 * Don't have a sweater * 189 00:09:40,047 --> 00:09:42,282 * Don't have perfume * 190 00:09:42,349 --> 00:09:43,416 * Don't have a bed * 191 00:09:43,483 --> 00:09:45,052 * There are no people * 192 00:09:45,118 --> 00:09:48,789 JONES: These banks take more and more risk, 193 00:09:48,856 --> 00:09:51,558 Investing in financial economics not the real economy. 194 00:09:51,625 --> 00:09:54,795 Financial economy, as it happens, 195 00:09:54,862 --> 00:09:57,765 basically making money from money, 196 00:09:57,831 --> 00:10:00,834 instead of investing in companies and companies 197 00:10:00,901 --> 00:10:03,971 and contribute real economy 198 00:10:04,037 --> 00:10:08,308 199 00:10:08,375 --> 00:10:11,779 So what happens with bank and insurance companies 200 00:10:11,845 --> 00:10:14,381 involved in subprime loans? 201 00:10:14,447 --> 00:10:18,485 You can think of the-the end of 2007. What happened? 202 00:10:18,551 --> 00:10:22,422 Banks start looking a little more carefully on their balance sheet 203 00:10:22,489 --> 00:10:25,793 They see their assets they get and they say, 204 00:10:25,859 --> 00:10:28,862 "Wow, so many assets are trash 205 00:10:28,929 --> 00:10:31,064 " Okay, we know that this is bad, 206 00:10:31,131 --> 00:10:32,599 "high percentage of them, 207 00:10:32,666 --> 00:10:35,869 " and, um, some of our assets 208 00:10:35,936 --> 00:10:39,039 "is I-O-U's from another bank. 209 00:10:39,106 --> 00:10:40,974 I want to know if their balance sheet is as bad as us." 210 00:10:41,041 --> 00:10:42,642 And they start thinking, 211 00:10:42,710 --> 00:10:45,645 "Maybe so because we are all doing the same thing." 212 00:10:45,713 --> 00:10:48,782 And then they say, "You know, maybe when the loan is due, 213 00:10:48,849 --> 00:10:50,283 " We have to call, 214 00:10:50,350 --> 00:10:52,052 "says we don't go to renew it again, 215 00:10:52,119 --> 00:10:54,021 " Because we think, maybe, 216 00:10:54,087 --> 00:10:57,725 You can get problems and we won't get paid. " 217 00:10:57,791 --> 00:10:59,727 Suddenly, all banks start doing this 218 00:10:59,793 --> 00:11:01,428 And, basically, 219 00:11:01,494 --> 00:11:05,232 is when global credit markets freeze. 220 00:11:05,298 --> 00:11:08,035 Banks do not want to lend to each other again. 221 00:11:08,101 --> 00:11:11,604 And so changed to a very large liquidity crisis, 222 00:11:11,671 --> 00:11:13,673 and that's how all go. 223 00:11:13,741 --> 00:11:16,043 So this layering from debt to debt, 224 00:11:16,109 --> 00:11:18,912 financial institutions because other financial institutions, 225 00:11:18,979 --> 00:11:21,481 it turns out that is very dangerous 226 00:11:21,548 --> 00:11:22,983 News that you build: 227 00:11:23,050 --> 00:11:25,085 American investment bank Lehman Brothers 228 00:11:25,152 --> 00:11:27,420 has submitted for bankruptcy in New York. 229 00:11:27,487 --> 00:11:29,589 That happened in the last few minutes That means Wall Street institutions, 230 00:11:29,656 --> 00:11:31,091 who have been in business for 150 years 231 00:11:31,158 --> 00:11:33,626 and persist Great Depression, 232 00:11:33,693 --> 00:11:35,262 is now the highest profile victims of the credit crisis. 233 00:11:35,328 --> 00:11:38,966 234 00:11:39,032 --> 00:11:42,135 JONES: Not only that Lehman Brothers is bankrupt. 235 00:11:42,202 --> 00:11:45,305 In the U.S., Citigroup is rescued by the U.S. government with a guarantee for songs from 300 billion dollars AIG is redeemed 182 billion dollars. 236 00:11:45,372 --> 00:11:48,976 The best thing in life free 237 00:11:49,042 --> 00:11:54,748 * But you can give them to birds and bees * 238 00:11:54,815 --> 00:11:57,350 Bear Sterns is taken over by by J.P. Morgan 239 00:11:57,417 --> 00:12:01,021 after the U.S. government. secure them 240 00:12:07,094 --> 00:12:10,197 with 30 billion dollars guarantee. 241 00:12:10,263 --> 00:12:12,399 Fannie Mae and Freddie Mac, 242 00:12:12,465 --> 00:12:15,836 government supported mortgage lenders 243 00:12:15,903 --> 00:12:17,270 who is involved in sub-prime mortgage loans, 244 00:12:17,337 --> 00:12:19,139 245 00:12:19,206 --> 00:12:21,809 246 00:12:21,875 --> 00:12:25,578 saved by Federal Housing Financial Agency. 247 00:12:25,645 --> 00:12:29,382 Merrill Lynch was taken over by Bank of America. 248 00:12:29,449 --> 00:12:32,185 In the UK, Royal Bank of Scotland 249 00:12:32,252 --> 00:12:34,721 saved by the British government 250 00:12:34,788 --> 00:12:37,024 for 20 billion pounds, 251 00:12:37,090 --> 00:12:41,394 HBOS is redeemed for 13 billion pounds, 252 00:12:41,461 --> 00:12:43,897 and Lloyds for 4 billion pounds, 253 00:12:43,964 --> 00:12:49,837 on the exact same day, October 13, 2008. 254 00:12:49,903 --> 00:12:53,373 * Money doesn't get everything, it's right * 255 00:12:53,440 --> 00:12:56,509 * But what doesn't get, I can't use * 256 00:12:58,645 --> 00:13:01,214 Sir, another insurance company is under. 257 00:13:01,281 --> 00:13:05,352 Now determine the wisest move to an insurance company. 258 00:13:05,418 --> 00:13:07,120 (cock crowing) 259 00:13:22,202 --> 00:13:23,203 Bailout! 260 00:13:23,270 --> 00:13:24,972 The wisest step is a bailout! 261 00:13:25,038 --> 00:13:29,009 I remember sitting down, um... uh, in a room 262 00:13:29,076 --> 00:13:31,544 A little like this, in the Ministry of Finance, 263 00:13:31,611 --> 00:13:33,246 back in 2008, 264 00:13:33,313 --> 00:13:36,349 around time from the Lehman crisis 265 00:13:36,416 --> 00:13:37,951 We sit there. 266 00:13:38,018 --> 00:13:41,321 During the first half hour from the meeting, 267 00:13:41,388 --> 00:13:43,190 stock price 268 00:13:43,256 --> 00:13:45,425 one of the largest banks in the country down 50 percent. 269 00:13:45,492 --> 00:13:48,161 In the second half of the of the meeting, 270 00:13:48,228 --> 00:13:50,363 share price from the same bank 271 00:13:50,430 --> 00:13:52,265 up 50 percent 272 00:13:52,332 --> 00:13:54,401 We knew at that time, this was not Kansas anymore. 273 00:13:54,467 --> 00:13:57,570 274 00:13:57,637 --> 00:14:01,674 I mean, if the 2008 accident doesn't wake people up, 275 00:14:01,741 --> 00:14:03,376 um, I don't know what will 276 00:14:03,443 --> 00:14:06,013 (yawn) 277 00:14:07,580 --> 00:14:09,016 Where do we go from here? 278 00:14:09,082 --> 00:14:12,052 How do we handle with this financial crisis? 279 00:14:12,119 --> 00:14:14,521 and one of the most important first steps is understanding where we come from. 280 00:14:14,587 --> 00:14:16,723 Financial crisis 281 00:14:16,789 --> 00:14:18,625 It's not new that we will leave now. 282 00:14:18,691 --> 00:14:21,628 We experience many financial crises. 283 00:14:21,694 --> 00:14:23,463 The 19th century was filled with with the financial crisis, 284 00:14:23,530 --> 00:14:26,466 and even on 18 and 17 and 16th century, 285 00:14:26,533 --> 00:14:29,136 and when you start looking for in all these different examples 286 00:14:29,202 --> 00:14:31,972 287 00:14:32,039 --> 00:14:35,943 from the economy and their financial system and their crashes, 288 00:14:36,009 --> 00:14:38,045 You start getting a much better understanding 289 00:14:38,111 --> 00:14:40,880 of what the financial crisis is about. 290 00:14:40,948 --> 00:14:42,382 Seeds sown 291 00:14:42,449 --> 00:14:44,817 is the same seed which is sown 292 00:14:44,884 --> 00:14:48,188 in all previous crises 293 00:14:48,255 --> 00:14:52,292 So, if we see what works and what doesn't, 294 00:14:52,359 --> 00:14:56,563 there are no better lessons there than history. 295 00:15:11,044 --> 00:15:14,847 Tulip Mania starts back in 1562, 296 00:15:25,125 --> 00:15:28,128 * Oh, tulips, valuable tulips * 297 00:15:31,164 --> 00:15:34,334 For me to be healthy, makes me rich The tulip proved to be a sensation 298 00:15:39,672 --> 00:15:42,509 299 00:15:42,575 --> 00:15:45,312 among rich traders from Amsterdam, 300 00:15:45,378 --> 00:15:48,648 then start in their golden age. 301 00:15:48,715 --> 00:15:51,184 Traders build big houses 302 00:15:51,251 --> 00:15:53,086 surrounded by flower gardens, 303 00:16:01,828 --> 00:16:04,264 and prices start to soar. 304 00:16:04,331 --> 00:16:08,368 In 1636, a tulip bulb could be valuable 305 00:16:08,435 --> 00:16:10,970 a new train, two gray horses, 306 00:16:11,038 --> 00:16:13,040 and complete harness. 307 00:16:13,106 --> 00:16:15,775 Some tubers reported change hands 308 00:16:15,842 --> 00:16:18,078 more than ten times a day 309 00:16:18,145 --> 00:16:20,747 It looks like everyone can make money 310 00:16:20,813 --> 00:16:23,050 if only they buy tulips 311 00:16:23,116 --> 00:16:26,419 A kind of euphoria grips everyone 312 00:16:26,486 --> 00:16:29,889 But, on February 5, 1637, 313 00:16:29,956 --> 00:16:31,558 it's all over. 314 00:16:31,624 --> 00:16:35,195 At a tulip auction in Haarlem, in the Netherlands, 315 00:16:35,262 --> 00:16:38,065 only tulip sellers appear. 316 00:16:38,131 --> 00:16:40,333 There are no buyers. 317 00:16:40,400 --> 00:16:44,704 Harlem at that time in the grip of the Bubonic plague, 318 00:16:44,771 --> 00:16:49,309 so maybe that's why No one wants to go out and buy tulips 319 00:16:49,376 --> 00:16:51,211 But the damage is complete. 320 00:16:51,278 --> 00:16:54,181 The bottom falls from the tulip market 321 00:16:54,247 --> 00:16:58,451 Existing tubers ordered the price of from 5,000 guilders 322 00:16:58,518 --> 00:17:00,553 sold for fifty. 323 00:17:00,620 --> 00:17:05,125 This is what economists call bubbles 324 00:17:05,192 --> 00:17:08,761 Well, that bubble a financial episode 325 00:17:08,828 --> 00:17:10,697 where is the price of assets, 326 00:17:10,763 --> 00:17:14,434 whether it's tulip, or equity, or gold, 327 00:17:14,501 --> 00:17:16,769 basically being completely separate 328 00:17:16,836 --> 00:17:19,239 of any intrinsic value. 329 00:17:19,306 --> 00:17:22,209 Being in a bubble, like... 330 00:17:22,275 --> 00:17:27,414 yes, it's a country extreme hope and excitement and ignorance. 331 00:17:27,480 --> 00:17:30,717 And that can continue as long as people believe 332 00:17:30,783 --> 00:17:33,420 that there is something magical or new 333 00:17:33,486 --> 00:17:36,055 about today's assessment. 334 00:17:36,123 --> 00:17:38,057 In each boom-and-bust cycle, 335 00:17:38,125 --> 00:17:40,827 there are periods from extraordinary. 336 00:17:40,893 --> 00:17:42,162 "This time, it's different. 337 00:17:42,229 --> 00:17:43,796 Everything is different." 338 00:17:43,863 --> 00:17:45,765 And, there are always cool reasons, 339 00:17:45,832 --> 00:17:49,636 and things like, "Okay, You know, our demography is different." 340 00:17:49,702 --> 00:17:53,005 Or, you know, "This time, really interest costs are very low." 341 00:17:53,072 --> 00:17:54,541 Or "inflation has been solved." 342 00:17:54,607 --> 00:17:57,210 Or, "Oh, there's an explosion in gold mining." 343 00:17:57,277 --> 00:18:00,012 You know, tulip-- tulips are the first. 344 00:18:00,079 --> 00:18:03,750 "This is the first time You will ever be able to buy this tulip 345 00:18:03,816 --> 00:18:05,352 You must enter now." 346 00:18:05,418 --> 00:18:07,687 There are always reasons why do you want 347 00:18:07,754 --> 00:18:12,325 to suspend your rational faculty and buy this. 348 00:18:12,392 --> 00:18:14,327 Usually, that's because you look around, 349 00:18:14,394 --> 00:18:16,129 and you see everyone does it. 350 00:18:22,135 --> 00:18:24,804 In 1711, the British government 351 00:18:24,871 --> 00:18:28,408 being in debt, for songs of 9 million pounds. 352 00:18:28,475 --> 00:18:30,243 Some entrepreneurs 353 00:18:30,310 --> 00:18:32,745 named Edward Harley and John Blunt 354 00:18:32,812 --> 00:18:35,548 designing a scheme to save the government 355 00:18:36,416 --> 00:18:38,385 Instead of repayment, 356 00:18:38,451 --> 00:18:40,487 anyone to whom the government owes money 357 00:18:40,553 --> 00:18:42,822 is obliged to accept shares 358 00:18:42,889 --> 00:18:46,393 in a company called South Sea Company. 359 00:18:46,459 --> 00:18:48,661 At the same time, South Sea Company 360 00:18:48,728 --> 00:18:50,630 given exclusive rights 361 00:18:50,697 --> 00:18:54,000 for the trade monopoly with South America. 362 00:18:54,066 --> 00:18:56,135 Comfortable to be ignored 363 00:18:56,203 --> 00:18:57,570 is the fact that Spain, 364 00:18:57,637 --> 00:18:59,539 with whom Britain is at war, 365 00:18:59,606 --> 00:19:02,209 control all trade with South America 366 00:19:02,275 --> 00:19:05,778 and have done it for 200 years 367 00:19:05,845 --> 00:19:07,314 But hope is high, 368 00:19:07,380 --> 00:19:10,417 and the scheme is phenomenal success. 369 00:19:11,451 --> 00:19:14,787 In 1713, the war ended. 370 00:19:16,989 --> 00:19:21,027 Spain then allows England exactly one ship a year 371 00:19:21,093 --> 00:19:23,530 no more than 500 tons 372 00:19:23,596 --> 00:19:25,965 to trade with South America, 373 00:19:26,032 --> 00:19:27,734 and a quarter from the results 374 00:19:27,800 --> 00:19:29,869 is to go to the King of Spain - 375 00:19:29,936 --> 00:19:34,173 not a winning scheme for a bankrupt country 376 00:19:36,676 --> 00:19:40,313 And, in 1718, the war with Spain broke out again, 377 00:19:40,380 --> 00:19:44,651 and company assets in South America confiscated, 378 00:19:44,717 --> 00:19:47,954 and any prospect profit from trading 379 00:19:48,020 --> 00:19:49,856 disappears overnight 380 00:19:49,922 --> 00:19:53,360 But, amazing, The hope is still high. 381 00:19:53,426 --> 00:19:55,895 South Sea Company talks about its value 382 00:19:55,962 --> 00:19:58,765 of trade potential with South America, 383 00:19:58,831 --> 00:20:01,501 assisted by politicians and members of the government, 384 00:20:01,568 --> 00:20:03,503 who is acting, 385 00:20:03,570 --> 00:20:05,505 and stock prices up 386 00:20:05,572 --> 00:20:08,375 from 128 pounds in January 387 00:20:08,441 --> 00:20:11,077 to be 330 pounds in March, 388 00:20:11,143 --> 00:20:13,713 890 pounds in early June 389 00:20:13,780 --> 00:20:17,917 and finally £ 1000 in early August 390 00:20:17,984 --> 00:20:19,719 All nice bubbles must explode, 391 00:20:19,786 --> 00:20:23,656 and the South Sea bubble burst in a spectacular way. 392 00:20:25,392 --> 00:20:27,093 Of 1000 pounds in August, 393 00:20:27,159 --> 00:20:30,730 Stock drops to one hundred at the end of the year. 394 00:20:30,797 --> 00:20:32,765 With the fall of of the stock price, 395 00:20:32,832 --> 00:20:34,601 thousands of people destroyed, 396 00:20:34,667 --> 00:20:36,503 including Sir Isaac Newton, 397 00:20:36,569 --> 00:20:38,338 which loses equivalent 398 00:20:38,405 --> 00:20:40,540 of 2.4 million pounds, 399 00:20:40,607 --> 00:20:43,242 and about which, his nephew reports 400 00:20:43,310 --> 00:20:45,445 he never likes Talk about. 401 00:20:45,512 --> 00:20:49,115 Newton said, "I count star movement, 402 00:20:49,181 --> 00:20:51,784 but not human madness." 403 00:20:51,851 --> 00:20:54,821 I hope he is included himself in that matter 404 00:20:54,887 --> 00:20:57,690 South sea bubble is a perfect example 405 00:20:57,757 --> 00:21:00,427 from what is called euphoria 406 00:21:00,493 --> 00:21:03,696 One of the things we must control 407 00:21:03,763 --> 00:21:05,231 is this tendency 408 00:21:05,298 --> 00:21:08,535 for people to go through this period, 409 00:21:08,601 --> 00:21:13,039 a kind of mass euphoria and mass pessimism. 410 00:21:13,105 --> 00:21:16,208 When people become very optimistic about the future 411 00:21:16,275 --> 00:21:18,345 and they project this optimism 412 00:21:18,411 --> 00:21:19,779 into asset prices, 413 00:21:19,846 --> 00:21:21,581 there can be an asset bubble 414 00:21:21,648 --> 00:21:23,650 And prices go up, and when prices rise, 415 00:21:23,716 --> 00:21:26,218 people say, "Oh, it seems optimists about the future. 416 00:21:26,285 --> 00:21:28,220 I also have to be optimistic." 417 00:21:28,287 --> 00:21:31,424 So I bought the asset, and it pushed the price a little more. 418 00:21:31,491 --> 00:21:33,426 Moving prices are completely out of line 419 00:21:33,493 --> 00:21:34,927 with all kinds of reality 420 00:21:34,994 --> 00:21:37,597 or any income base or, in the housing market, 421 00:21:37,664 --> 00:21:39,366 whatever income base, 422 00:21:39,432 --> 00:21:41,901 and that becomes a bubble that is filled by itself. 423 00:21:41,968 --> 00:21:44,804 If you think you invest in tulips 424 00:21:44,871 --> 00:21:47,374 because you can always sell tulips to other people 425 00:21:47,440 --> 00:21:50,109 with a higher price, 426 00:21:50,176 --> 00:21:52,512 You don't invest, You speculate. 427 00:21:53,746 --> 00:21:56,315 And there are differences. 428 00:21:56,383 --> 00:21:59,852 One of them is... has a real impact on the economy, 429 00:21:59,919 --> 00:22:01,454 the other one 430 00:22:01,521 --> 00:22:03,723 people give money back and forth, 431 00:22:03,790 --> 00:22:05,992 and hope, that after a while, 432 00:22:06,058 --> 00:22:08,995 when music stops, they will become one 433 00:22:09,061 --> 00:22:11,664 who doesn't hold the package, who holds the money 434 00:22:11,731 --> 00:22:14,967 And again, it's okay. Let them do that. 435 00:22:15,034 --> 00:22:18,104 But don't do it with your family's house and all your money 436 00:22:18,170 --> 00:22:21,340 When you're bubble, you can't see beyond that, 437 00:22:23,410 --> 00:22:25,712 really know or recognize it as happened 438 00:22:25,778 --> 00:22:28,415 It seems like success, it feels successful, 439 00:22:28,481 --> 00:22:29,482 which is even more dangerous. 440 00:22:29,549 --> 00:22:31,451 Past bubbles, 441 00:22:31,518 --> 00:22:33,953 You know how they end. 442 00:22:34,020 --> 00:22:35,922 And, when they end, 443 00:22:35,988 --> 00:22:37,790 You understand, where they have ended 444 00:22:37,857 --> 00:22:39,726 This one is not over, 445 00:22:39,792 --> 00:22:42,862 becomes very different from your other memories. 446 00:22:42,929 --> 00:22:45,898 It's very difficult to remind yourself of that 447 00:22:45,965 --> 00:22:47,567 during the boom, 448 00:22:47,634 --> 00:22:49,669 because everyone else makes a lot of money, 449 00:22:49,736 --> 00:22:52,639 and you certainly want to make lots of money with them 450 00:22:52,705 --> 00:22:55,241 And if not, Actually you are so stupid. 451 00:22:55,307 --> 00:23:00,647 That's one of them great economic mystery 452 00:23:00,713 --> 00:23:02,649 that if everyone decides it's okay, 453 00:23:02,715 --> 00:23:04,417 it's okay 454 00:23:04,484 --> 00:23:06,586 And if everyone decides it's a disaster, 455 00:23:06,653 --> 00:23:08,087 it's really a disaster 456 00:23:08,154 --> 00:23:11,691 So, everyone believes it is a certain way 457 00:23:11,758 --> 00:23:13,225 make it in a certain way. 458 00:23:13,292 --> 00:23:15,962 From 1950 to the 1970s, 459 00:23:16,028 --> 00:23:17,764 John Kenneth Galbraith 460 00:23:17,830 --> 00:23:21,267 maybe the most world-famous economist. 461 00:23:21,333 --> 00:23:24,704 Recurring degrees into insanity 462 00:23:24,771 --> 00:23:28,908 not entirely interesting characteristics of capitalism 463 00:23:28,975 --> 00:23:32,111 J.K. Galbraith is intensively about-- 464 00:23:32,178 --> 00:23:34,046 about speculative euphoria, 465 00:23:34,113 --> 00:23:36,616 and about why periods speculative euphoria 466 00:23:36,683 --> 00:23:38,851 continues to occur over a period of time. 467 00:23:38,918 --> 00:23:40,620 This is very much human behavior, 468 00:23:40,687 --> 00:23:43,956 but also our failure, uh, to be able to handle 469 00:23:44,023 --> 00:23:47,059 the worst consequences of the euphoria 470 00:23:47,126 --> 00:23:48,928 (chugging train) 471 00:23:57,236 --> 00:24:01,908 * You cannot lose by train * 472 00:24:01,974 --> 00:24:05,144 They are things to come 473 00:24:05,211 --> 00:24:08,915 So come and invest on the train * 474 00:24:08,981 --> 00:24:12,184 Great luck for all they will bring * 475 00:24:12,251 --> 00:24:13,786 TERRY JONES: In the 1840s, 476 00:24:13,853 --> 00:24:17,423 trains are promoted as investments that are very easy to do. 477 00:24:17,490 --> 00:24:20,927 The shares inside can be purchased for a 10 percent deposit. 478 00:24:20,993 --> 00:24:24,096 The obstacle is the railroad the company reserves the right 479 00:24:24,163 --> 00:24:28,100 to call the rest anytime. 480 00:24:28,167 --> 00:24:31,037 Thousands of investors on simple income 481 00:24:31,103 --> 00:24:33,105 carry a large number shares 482 00:24:33,172 --> 00:24:36,475 while only able to pay a deposit 483 00:24:36,543 --> 00:24:40,947 The family places them all savings into prospective companies 484 00:24:41,013 --> 00:24:43,850 and lose everything When the bubble breaks, 485 00:24:43,916 --> 00:24:49,021 without knowing they take ten times more risky than it makes sense, 486 00:24:49,088 --> 00:24:52,559 and nothing prevents it from doing it 487 00:24:54,761 --> 00:24:58,097 Not honorable history from financial euphoria 488 00:24:58,164 --> 00:25:00,600 continue and continue 489 00:25:17,984 --> 00:25:20,687 TERRY JONES: In the 20s the age of prosperity, 490 00:25:20,753 --> 00:25:23,590 but the wealth is not shared at all 491 00:25:23,656 --> 00:25:25,257 throughout the population. 492 00:25:25,324 --> 00:25:29,128 In 1929, the top five percent of the population accepted around one third 493 00:25:29,195 --> 00:25:31,764 of all personal income. 494 00:25:31,831 --> 00:25:35,134 495 00:25:35,201 --> 00:25:37,670 Now the richest five percent of humans 496 00:25:37,737 --> 00:25:39,505 can't eat more than all of us, 497 00:25:39,572 --> 00:25:43,776 so they are forced to spend their money on luxury goods like property or investing in stocks, 498 00:25:43,843 --> 00:25:46,613 Thus hoping to increase their wealth. 499 00:25:46,679 --> 00:25:49,248 Not only rich people, but middle-class Americans 500 00:25:49,315 --> 00:25:52,151 showing what John Kenneth Galbraith is described as... 501 00:25:52,218 --> 00:25:56,455 extraordinary desire to get rich quickly 502 00:25:56,522 --> 00:25:59,659 with a minimum of physical effort 503 00:25:59,726 --> 00:26:03,029 TERRY JONES: The Stock Exchange in New York exploded. 504 00:26:03,095 --> 00:26:06,098 In May 1928, stock volume reached 5 million, 505 00:26:06,165 --> 00:26:10,870 506 00:26:10,937 --> 00:26:12,939 records of all time 507 00:26:14,106 --> 00:26:16,909 The problem is that many investors 508 00:26:16,976 --> 00:26:18,978 do not use their own money 509 00:26:19,045 --> 00:26:21,981 They borrow money to buy shares 510 00:26:22,048 --> 00:26:26,318 This is known in the financial sector of the world as "buying on margin." 511 00:26:26,385 --> 00:26:28,655 TERRY JONES: Say two hundred dollars and you borrow eight hundred more 512 00:26:28,721 --> 00:26:30,156 to invest thousand dollars in stock. 513 00:26:30,222 --> 00:26:33,392 If the stock price goes up 30 percent, 514 00:26:33,459 --> 00:26:36,495 You generate 150 percent profit. 515 00:26:36,562 --> 00:26:39,666 After you pay back eight hundred dollars, 516 00:26:39,732 --> 00:26:42,234 You now have five hundred dollars for yourself 517 00:26:42,301 --> 00:26:45,972 518 00:26:46,038 --> 00:26:49,108 But if the stock price falls 30 percent, 519 00:26:49,175 --> 00:26:52,912 Your stock ends up being worth only 700 dollars, 520 00:26:52,979 --> 00:26:55,982 but you still need to pay 800 dollars. 521 00:26:56,048 --> 00:26:58,885 You now owe a bank one hundred dollars The problem is the loan money to buy shares, 522 00:26:58,951 --> 00:27:01,520 "buy by margin," 523 00:27:01,587 --> 00:27:03,489 although it strengthens The advantage is also strengthens losses. 524 00:27:03,555 --> 00:27:08,194 You can end because money to the bank without has one penny left. 525 00:27:08,260 --> 00:27:12,631 TERRY JONES: At the end of 1928, 526 00:27:12,699 --> 00:27:15,234 the people gather to buy shares on the margin. 527 00:27:15,301 --> 00:27:18,537 In other words, speculation has detained people 528 00:27:18,604 --> 00:27:22,541 unlike before 529 00:27:22,608 --> 00:27:24,343 530 00:27:24,410 --> 00:27:28,347 Never before or not has so much to be 531 00:27:28,414 --> 00:27:33,920 very amazing, so easy, and so rich quick. 532 00:27:33,986 --> 00:27:36,022 You can say it What is the difference 533 00:27:36,088 --> 00:27:38,758 between speculation and gambling? 534 00:27:38,825 --> 00:27:41,327 Well, uh, a reporter, Will Payne, 535 00:27:41,393 --> 00:27:44,997 explain in this edition from Karya Dunia 536 00:27:45,064 --> 00:27:47,466 A gambler only wins because someone else loses 537 00:27:47,533 --> 00:27:50,069 When you invest in stocks and shares, everyone wins 538 00:27:50,136 --> 00:27:53,205 An investor buys shares of at General Motors to one hundred dollars. 539 00:27:53,272 --> 00:27:55,307 He then sells it to another for 150 dollars, 540 00:27:55,374 --> 00:27:57,409 who sells it to one third for 200 dollars. 541 00:27:57,476 --> 00:28:00,212 Everyone makes money! 542 00:28:00,279 --> 00:28:01,981 TERRY JONES: It's like magic, 543 00:28:02,048 --> 00:28:04,817 keeps pulling rabbits come out of hats 544 00:28:04,884 --> 00:28:08,788 And like magic, is an illusion 545 00:28:08,855 --> 00:28:14,727 What will Payne forget? is the stock price Can also go down. 546 00:28:16,462 --> 00:28:19,198 But as long as the price is shares increase, 547 00:28:19,265 --> 00:28:21,467 everyone is happy to run it. 548 00:28:21,533 --> 00:28:25,137 The illusion continues from people who were previously rational. 549 00:28:27,073 --> 00:28:30,276 from the National Democrats Committee, John J. Raskob, 550 00:28:30,342 --> 00:28:34,480 who wrote an article entitled "Everyone should be rich." 551 00:28:34,546 --> 00:28:37,183 RASKOB: Anyone who saves 15 dollars a month, 552 00:28:37,249 --> 00:28:39,618 invest it in the voice ordinary shares, 553 00:28:39,685 --> 00:28:41,520 and do not distribute dividends, 554 00:28:41,587 --> 00:28:45,024 it will be worth several 80,000 dollars after 20 years. 555 00:28:45,091 --> 00:28:48,727 TERRY JONES: Raskob does not aim at it scheme in the middle class, 556 00:28:48,795 --> 00:28:50,997 but in men are ordinary workers 557 00:28:51,063 --> 00:28:56,803 The press is round in its praise for Raskob's Debt Speculation Machine, 558 00:28:56,869 --> 00:28:58,537 a practical utopia, 559 00:28:58,604 --> 00:29:02,308 the biggest vision of the biggest Wall Street mind. 560 00:29:02,374 --> 00:29:05,144 But not everyone sings from the same hymn sheet. 561 00:29:05,211 --> 00:29:08,781 Roger Babson, a businessman and business theorist, 562 00:29:08,848 --> 00:29:13,986 start warning about a market crash since 1926. 563 00:29:14,053 --> 00:29:16,322 BABSON: Sooner or later an accident will come 564 00:29:16,388 --> 00:29:19,458 The factory will be closed, Men will be thrown out of work. 565 00:29:19,525 --> 00:29:22,761 The result will be serious depression TERRY JONES: Paul Warburg an early banker and advocate 566 00:29:24,430 --> 00:29:27,699 from U.S. Federal backup system 567 00:29:27,766 --> 00:29:29,668 PAUL WARBURG: If this orgies uncontrolled speculation 568 00:29:29,735 --> 00:29:32,504 not stopped, 569 00:29:32,571 --> 00:29:34,941 finally there will be into general depression 570 00:29:35,007 --> 00:29:38,010 involve all countries. 571 00:29:38,077 --> 00:29:39,846 Ah, Warburg is out of date! 572 00:29:39,912 --> 00:29:42,548 Yes, he is sandbagging American prosperity 573 00:29:42,614 --> 00:29:46,552 TERRY JONES: Wall Street is round denounced Babson and Warburg. 574 00:29:46,618 --> 00:29:49,856 575 00:29:49,922 --> 00:29:53,292 Consensus judgment millions that are evaluated 576 00:29:53,359 --> 00:29:56,028 in this amazing market, Stock Exchange, 577 00:29:56,095 --> 00:29:58,797 is the stock Currently not rated too high. 578 00:29:58,865 --> 00:30:02,601 Economic conditions the world seems on the verge of a great forward movement. 579 00:30:02,668 --> 00:30:07,373 Stock prices achieve what looks like permanently high highlands 580 00:30:07,439 --> 00:30:11,143 Where is the male group with wisdom that embraces all 581 00:30:11,210 --> 00:30:16,048 who will give their rights to veto the judgment this smart person? 582 00:30:17,683 --> 00:30:21,120 This ad appears on Saturday Evening Post 583 00:30:21,187 --> 00:30:25,491 a few weeks before crisis in 1929. 584 00:30:25,557 --> 00:30:29,528 MAN: "In 1719, there practically impossible looking for facts. " How different positions from investors in 1929! 585 00:30:29,595 --> 00:30:33,365 For now, every investor has at disposal, facility to get the facts. " 586 00:30:33,432 --> 00:30:39,939 October 24 is the first of days 587 00:30:40,006 --> 00:30:42,975 that identifies history with panic in 1929. 588 00:30:43,042 --> 00:30:47,313 That day, almost 13 million shares changed hands, 589 00:30:47,379 --> 00:30:51,117 Many of them had prices destroying dreams and hopes of those who have them. 590 00:30:51,183 --> 00:30:56,722 591 00:30:56,788 --> 00:31:02,328 592 00:31:02,394 --> 00:31:07,466 593 00:31:07,533 --> 00:31:11,770 now find the problem by buying on the margin, 594 00:31:11,837 --> 00:31:16,642 as brokers sent telegrams demanding large amounts of cash 595 00:31:16,708 --> 00:31:18,710 VINTAGE NARRATOR: This happened in 1929 596 00:31:18,777 --> 00:31:20,746 when overinflated American economy, 597 00:31:20,812 --> 00:31:24,083 and the stock market that triggers it, falls. 598 00:31:24,150 --> 00:31:27,819 At the end of the year, banks across the country close their doors 599 00:31:27,886 --> 00:31:32,091 Like the fear of people screaming to reclaim their savings. 600 00:31:32,158 --> 00:31:35,694 For many people, many observers, that means that their dreams - 601 00:31:35,761 --> 00:31:38,430 Actually, their short reality luxury - 602 00:31:38,497 --> 00:31:41,968 has sparkled together with home, 603 00:31:42,034 --> 00:31:45,972 cars, fur, jewelry and reputation. 604 00:31:50,776 --> 00:31:53,779 (footsteps) 605 00:31:53,845 --> 00:31:57,716 GALBRAITH: Tuesday, October 29, is the most devastating day 606 00:31:57,783 --> 00:32:00,086 in history New York Stock Market. 607 00:32:03,789 --> 00:32:05,591 (rustling paper) 608 00:32:08,760 --> 00:32:11,063 TERRY JONES: Accident on Wall Street 1929 609 00:32:11,130 --> 00:32:14,166 is in and a prolonged crisis, 610 00:32:14,233 --> 00:32:17,970 different from some panic before in history 611 00:32:18,037 --> 00:32:21,373 This is a combination of euphoria with large loans. 612 00:32:21,440 --> 00:32:25,444 And combined speculation with loan money 613 00:32:25,511 --> 00:32:30,182 is the most toxic combination in capitalism. 614 00:32:30,249 --> 00:32:33,319 * Yes, yes, I need crystale to drop popping * 615 00:32:33,385 --> 00:32:35,988 I need a diamond shake shake * 616 00:32:36,055 --> 00:32:37,923 * I need the money 617 00:32:37,990 --> 00:32:39,725 I need money, money 618 00:32:39,791 --> 00:32:41,093 I need money, money 619 00:32:41,160 --> 00:32:42,894 We are out of Great Depression 620 00:32:42,961 --> 00:32:45,431 with almost no private sector debt. 621 00:32:45,497 --> 00:32:48,100 Households and companies are not too indebted, 622 00:32:48,167 --> 00:32:50,202 partly because they are bankrupt, 623 00:32:50,269 --> 00:32:52,071 partly because they pay debts 624 00:32:52,138 --> 00:32:55,507 and for generations of Americans are afraid to owe. 625 00:32:55,574 --> 00:32:58,010 The corporation is afraid to owe. 626 00:32:58,077 --> 00:33:03,315 Okay, but slowly Over time because of the economy done well, 627 00:33:03,382 --> 00:33:06,718 slowly memories Great Depression fades 628 00:33:06,785 --> 00:33:10,056 and the new generation become more willing to borrow, 629 00:33:10,122 --> 00:33:11,757 both households and companies, 630 00:33:11,823 --> 00:33:13,725 and this debt ratio starts climbing. 631 00:33:13,792 --> 00:33:18,897 In the United States if you see a long sweep from, uh, history, 632 00:33:18,964 --> 00:33:22,968 You will find it there have two big peaks from private debt 633 00:33:23,035 --> 00:33:24,636 as part of income. 634 00:33:24,703 --> 00:33:29,141 One of them happened in 1929, the other happened in 2008. 635 00:33:29,208 --> 00:33:33,679 The road to financial crisis - often at least - 636 00:33:33,745 --> 00:33:37,316 starting with the private sector being careless about debt 637 00:33:37,383 --> 00:33:39,585 Debt is all about debt, uh... 638 00:33:39,651 --> 00:33:43,089 people take large amounts of from debt hoping for that 639 00:33:43,155 --> 00:33:47,226 Beautiful things will happen happen in the future that will let them pay it back 640 00:33:47,293 --> 00:33:51,763 No one has ever studied for a long time. We forgot. 641 00:33:51,830 --> 00:33:55,501 The person who studies the lesson, who is undergoing the lesson, dies. 642 00:33:55,567 --> 00:33:59,605 And their children see Great Depression like, 643 00:33:59,671 --> 00:34:01,407 as an episode of history. 644 00:34:01,473 --> 00:34:04,310 But why did that happen? from time to time 645 00:34:04,376 --> 00:34:06,545 for centuries? 646 00:34:17,423 --> 00:34:22,361 TERRY JONES: In the 1960s, 70s and 80s, economist Hyman Minsky 647 00:34:22,428 --> 00:34:27,133 proposes finance hypothesis of instability 648 00:34:28,267 --> 00:34:30,802 -Hi father. -Oh, hello, kid 649 00:34:30,869 --> 00:34:32,671 - Sit. -Sure. 650 00:34:32,738 --> 00:34:35,474 -Now, listen, Alan. -I'm all ears, Dad. 651 00:34:35,541 --> 00:34:39,145 The essence of finance hypothesis of instability 652 00:34:39,211 --> 00:34:41,247 is that financial traumas - 653 00:34:41,313 --> 00:34:42,981 Do you mean crashes and such? 654 00:34:43,048 --> 00:34:49,121 Exactly. Occurs as normal function in a capitalist economy. 655 00:34:49,188 --> 00:34:52,158 This does not mean that the economy is always 656 00:34:52,224 --> 00:34:53,959 staggered disaster gap. 657 00:34:54,025 --> 00:34:55,961 I have to hope not What kind of sys - 658 00:34:56,027 --> 00:34:57,763 Son, be serious. 659 00:34:57,829 --> 00:35:00,132 Normal function an economy 660 00:35:00,199 --> 00:35:02,601 strongly financial situation 661 00:35:02,668 --> 00:35:06,037 both are calm and overall success. 662 00:35:06,104 --> 00:35:10,609 But peace and success are not independent countries 663 00:35:10,676 --> 00:35:12,811 You mean stability causes more optimism 664 00:35:12,878 --> 00:35:15,781 and therefore borrow more in stocks and homes. 665 00:35:15,847 --> 00:35:18,884 Uh huh. And this leads to a transformation overtime 666 00:35:18,950 --> 00:35:21,853 from the initially strong financial structure 667 00:35:21,920 --> 00:35:23,322 into fragile structures. 668 00:35:23,389 --> 00:35:26,057 Wait, let me straighten this 669 00:35:26,124 --> 00:35:27,593 After experiencing severe depression, 670 00:35:27,659 --> 00:35:30,996 the government applies rules in the financial world. 671 00:35:31,062 --> 00:35:32,998 Following this period of stability, 672 00:35:33,064 --> 00:35:34,633 but the problem is with this stability 673 00:35:34,700 --> 00:35:36,668 is it breathing too confident 674 00:35:36,735 --> 00:35:39,938 Overconfidence leads to financial euphoria, 675 00:35:40,005 --> 00:35:44,109 during that time the politicians relaxed the rules. 676 00:35:44,176 --> 00:35:46,545 This then leads to excessive loans, 677 00:35:46,612 --> 00:35:51,283 and excessive loans and euphoria bubbles cause instability 678 00:35:51,350 --> 00:35:54,520 By Jove, I think my child got it. 679 00:35:54,586 --> 00:35:56,688 I have heard about that at the dining table 680 00:35:56,755 --> 00:35:58,224 since I was six years old. 681 00:35:59,958 --> 00:36:02,928 Hyman Minsky usually says, uh, 682 00:36:02,994 --> 00:36:04,596 stability is destabilizing. 683 00:36:04,663 --> 00:36:08,267 This causes people to be too confident, 684 00:36:08,334 --> 00:36:10,402 That causes people to forget 685 00:36:10,469 --> 00:36:12,671 about the underlying system properties, 686 00:36:12,738 --> 00:36:15,507 that he is inherently unstable, is inherently unstable 687 00:36:15,574 --> 00:36:17,609 But it's a strong hypothesis 688 00:36:17,676 --> 00:36:20,979 And the hypothesis is actually, basically, 689 00:36:21,046 --> 00:36:22,948 there is a long cycle where 690 00:36:23,014 --> 00:36:25,817 people forget about debt danger 691 00:36:25,884 --> 00:36:28,520 forgetting about danger is very leverage. 692 00:36:28,587 --> 00:36:31,757 That applies to both borrowers, to lenders, 693 00:36:31,823 --> 00:36:33,425 for government regulators, everyone, 694 00:36:33,492 --> 00:36:35,861 And the last finances crisis recedes 695 00:36:35,927 --> 00:36:38,297 into memory mist, 696 00:36:38,364 --> 00:36:39,798 and that makes you ready for the next one 697 00:36:39,865 --> 00:36:42,668 He predicts financially complex capitalism 698 00:36:42,734 --> 00:36:45,904 creates crashes, creates big and bust explosions, 699 00:36:45,971 --> 00:36:50,008 it can on several occasions reach the scale of 1929. 700 00:36:50,075 --> 00:36:53,011 So, in 1929, could happen again 701 00:36:53,078 --> 00:36:54,713 That is "Minksy-anism." 702 00:36:54,780 --> 00:36:56,282 (playing piano) 703 00:37:01,787 --> 00:37:05,223 Hyman Minsky said bubbles in three stages. 704 00:37:05,291 --> 00:37:09,528 The first participant is hedged in line. 705 00:37:09,595 --> 00:37:11,397 * What they save or make or get * 706 00:37:11,463 --> 00:37:13,064 Pay interest on their debt * 707 00:37:13,131 --> 00:37:16,968 * The economy looks beautiful * 708 00:37:17,035 --> 00:37:20,506 The second stage involves some speculation * 709 00:37:20,572 --> 00:37:24,276 * Speculators borrow cash to buy more shares * 710 00:37:24,343 --> 00:37:26,345 * And as long as the market goes up * 711 00:37:26,412 --> 00:37:28,480 * Nothing bad surprise * 712 00:37:28,547 --> 00:37:31,550 * But when it falls This brings them unconscious * 713 00:37:31,617 --> 00:37:35,020 * The things obtained are very unstable * 714 00:37:35,086 --> 00:37:39,358 * This is where dangerous stage starts * 715 00:37:39,425 --> 00:37:40,826 People borrow more 716 00:37:40,892 --> 00:37:45,130 * To pay their interest as before * 717 00:37:45,196 --> 00:37:49,301 * And in the end it's fair the bank wins * 718 00:37:49,368 --> 00:37:52,037 But he is not himself, eh, a banker 719 00:37:52,103 --> 00:37:55,240 Okay, he is not himself, So he has a bigger picture. 720 00:37:55,307 --> 00:37:56,808 He is able back from this 721 00:37:56,875 --> 00:37:59,678 and understand the overall system. 722 00:37:59,745 --> 00:38:02,348 For someone to write about financial instability 723 00:38:02,414 --> 00:38:05,016 in the late 1950s like he did, 724 00:38:05,083 --> 00:38:08,387 You know, this is the period at least on the surface 725 00:38:08,454 --> 00:38:12,724 is the most period financially stable The United States has ever had, 726 00:38:12,791 --> 00:38:15,461 and it doesn't seem like that 727 00:38:15,527 --> 00:38:18,930 what he says is relevant, 728 00:38:18,997 --> 00:38:21,433 uh, for the kind of economy we develop 729 00:38:21,500 --> 00:38:23,802 JOHN CASSIDY: And, everyone at Harvard and MIT 730 00:38:23,869 --> 00:38:26,738 and Chicago and so on other universities 731 00:38:26,805 --> 00:38:29,508 who says, look, the financial system is very stable, 732 00:38:29,575 --> 00:38:32,110 Are you Speaking of, Hyman? 733 00:38:32,177 --> 00:38:34,245 So, he was discredited, very, 734 00:38:34,312 --> 00:38:35,947 in the profession 735 00:38:36,014 --> 00:38:40,419 And suddenly, 2008, everything goes to hell, 736 00:38:40,486 --> 00:38:42,921 financial system basically has been detonated World, 737 00:38:42,988 --> 00:38:44,322 He is the one who warns 738 00:38:44,390 --> 00:38:46,592 this can happen 25 years before, 739 00:38:46,658 --> 00:38:49,260 so everyone suddenly becomes a Minskyite. 740 00:38:49,327 --> 00:38:51,262 Whoever reads the item 741 00:38:51,329 --> 00:38:53,699 can already see crisis coming 742 00:38:53,765 --> 00:38:55,401 So, the Queen asked, you know, 743 00:38:55,467 --> 00:38:56,835 "Why don't you guys? see that coming?" 744 00:38:56,902 --> 00:38:58,737 The answer is They don't read Minsky. 745 00:38:58,804 --> 00:39:02,908 If they have read Minsky, they really will have seen it coming 746 00:39:02,974 --> 00:39:04,309 That's very clear. 747 00:39:04,376 --> 00:39:06,378 You know, what is this kind of boom? 748 00:39:06,445 --> 00:39:08,980 This is an euphoria... system. 749 00:39:09,047 --> 00:39:12,283 This is what this is booming assets look like. 750 00:39:12,350 --> 00:39:14,252 Minsky is right. 751 00:39:14,319 --> 00:39:15,621 He is dead. 752 00:39:15,687 --> 00:39:17,656 Which raises questions, 753 00:39:17,723 --> 00:39:19,324 how do we forget 754 00:39:19,391 --> 00:39:20,992 about not just his work 755 00:39:21,059 --> 00:39:22,628 but someone else's work, 756 00:39:22,694 --> 00:39:25,797 in that period before the crisis 757 00:39:25,864 --> 00:39:28,299 I don't mean only three or four years, 758 00:39:28,366 --> 00:39:30,936 I mean those three or four decades 759 00:39:31,002 --> 00:39:33,539 when economic 760 00:39:33,605 --> 00:39:35,974 chase the way 761 00:39:36,041 --> 00:39:38,710 overridden Minsky type dynamics 762 00:39:38,777 --> 00:39:40,111 for what's wrong 763 00:39:40,178 --> 00:39:44,015 Like many others in my economic profession, 764 00:39:44,082 --> 00:39:46,251 we may not even know who he is 765 00:39:46,317 --> 00:39:48,420 Well, Minsky is not comfortable 766 00:39:48,487 --> 00:39:52,691 He always works on the margins of... 767 00:39:52,758 --> 00:39:55,293 hierarchy from economic profession 768 00:39:55,360 --> 00:39:56,428 Uh... 769 00:39:56,495 --> 00:39:59,230 and that makes it... 770 00:39:59,297 --> 00:40:01,967 relative is easily ignored. 771 00:40:02,033 --> 00:40:04,570 This is a paradox, actually, with my father, 772 00:40:04,636 --> 00:40:06,071 why is he ignored, 773 00:40:06,137 --> 00:40:09,274 because very, maybe, the reason he was ignored, 774 00:40:09,340 --> 00:40:12,511 That is the reason finally becomes so celebrated. 775 00:40:12,578 --> 00:40:17,148 Hy Minsky is a very warm individual. 776 00:40:17,215 --> 00:40:20,151 And, I don't know how many economists have you met, okay? 777 00:40:20,218 --> 00:40:22,020 But it's not so especially its nature 778 00:40:22,087 --> 00:40:24,422 the economist is very famous. 779 00:40:24,490 --> 00:40:26,892 In university lectures, 780 00:40:26,958 --> 00:40:30,061 when outside the lecturer is brought in, 781 00:40:30,128 --> 00:40:31,362 Minsky will do it 782 00:40:31,429 --> 00:40:32,831 looks asleep 783 00:40:32,898 --> 00:40:34,933 or reading newspapers 784 00:40:35,000 --> 00:40:38,269 But, soon after Time Q-and-A comes, 785 00:40:38,336 --> 00:40:41,406 it's always clear He is the brightest one the person in the room, 786 00:40:41,473 --> 00:40:44,075 who actually knows what has happened, 787 00:40:44,142 --> 00:40:47,445 and, um, know what's wrong with that 788 00:40:47,513 --> 00:40:50,448 Minsky is a brilliant person. 789 00:40:50,516 --> 00:40:53,519 I just, uh... go for some of his lectures 790 00:40:53,585 --> 00:40:55,220 in Edinburgh and Cambridge, 791 00:40:55,286 --> 00:40:57,523 But he is very charming. 792 00:40:57,589 --> 00:40:59,858 Even Minsky predicted it 793 00:40:59,925 --> 00:41:02,060 the warning will be no more 794 00:41:02,127 --> 00:41:03,995 and he will be forgotten. 795 00:41:04,062 --> 00:41:06,732 So it seems it's time When he is remembered, 796 00:41:06,798 --> 00:41:09,067 and, hopefully maybe he's wrong, 797 00:41:09,134 --> 00:41:11,069 we will not forget what he says 798 00:41:11,136 --> 00:41:14,405 One of the ironies about the 2008 crisis is that, um, 799 00:41:14,472 --> 00:41:16,241 Minsky book is not printed 800 00:41:16,307 --> 00:41:18,810 The last book, Stabilizing An An unstable economy, 801 00:41:18,877 --> 00:41:19,945 When the accident happened, 802 00:41:20,011 --> 00:41:21,847 and as asset prices fall, 803 00:41:24,850 --> 00:41:26,518 because everyone wants to read 804 00:41:26,585 --> 00:41:27,753 the book about, uh, 805 00:41:27,819 --> 00:41:29,821 about the crisis that happened 806 00:41:29,888 --> 00:41:33,058 Stability leads to instability 807 00:41:33,124 --> 00:41:34,793 Euphoria makes us blind. 808 00:41:34,860 --> 00:41:36,795 And we take irresponsible risks 809 00:41:36,862 --> 00:41:38,930 that finally causes disaster 810 00:41:38,997 --> 00:41:41,399 So stable and a booming market 811 00:41:41,466 --> 00:41:44,402 makes us blind increases the risk. 812 00:41:44,469 --> 00:41:46,872 But can we measure it? this blindness? 813 00:41:46,938 --> 00:41:48,006 OK. 814 00:41:48,073 --> 00:41:50,742 There are indices based on prices 815 00:41:50,809 --> 00:41:52,544 people are willing to pay 816 00:41:52,611 --> 00:41:55,013 for protection against the fall of the market. 817 00:41:55,080 --> 00:41:59,651 These are markets that are traded risk prices 818 00:41:59,718 --> 00:42:01,219 And what's interesting 819 00:42:01,286 --> 00:42:03,121 is that this price is risky 820 00:42:03,188 --> 00:42:04,556 really decreases 821 00:42:04,623 --> 00:42:06,157 to a very low level 822 00:42:06,224 --> 00:42:08,426 during the period when the stock market 823 00:42:08,493 --> 00:42:11,730 go sky high and instability grows. 824 00:42:13,732 --> 00:42:18,269 So our perception Risk runs opposite to the actual risk 825 00:42:18,336 --> 00:42:20,806 In a 2008 accident, 826 00:42:20,872 --> 00:42:26,111 price risk at the lowest level ever. 827 00:42:26,177 --> 00:42:28,747 You are not permitted to teach in college. 828 00:42:28,814 --> 00:42:31,049 You can, but you won't do it get an economic seat 829 00:42:31,116 --> 00:42:33,752 in major, prestigious, global universities 830 00:42:33,819 --> 00:42:37,055 Only the economy says capitalism stability 831 00:42:37,122 --> 00:42:40,592 can be thought of in these universities. 832 00:42:47,933 --> 00:42:50,201 The conventional economic model 833 00:42:50,268 --> 00:42:52,470 which is used to run the economy 834 00:42:52,537 --> 00:42:55,073 known as a free market, 835 00:42:55,140 --> 00:42:58,610 or neoclassical economic theory, 836 00:42:58,677 --> 00:43:00,345 and that is based on the idea 837 00:43:00,411 --> 00:43:03,615 that we are all rational when it comes to money, 838 00:43:03,682 --> 00:43:09,154 that the economy will always find itself in equilibrium, 839 00:43:09,220 --> 00:43:12,624 and bubbles can't happen 840 00:43:17,295 --> 00:43:19,430 Neoclassical economy is this beautiful thing 841 00:43:19,497 --> 00:43:20,732 This is useful, actually. 842 00:43:20,799 --> 00:43:22,333 I use it myself all the time. 843 00:43:22,400 --> 00:43:26,672 It is said, let's give us a world a very rational person 844 00:43:26,738 --> 00:43:28,907 operate perfectly competitive market 845 00:43:28,974 --> 00:43:30,742 and see how they interact, 846 00:43:30,809 --> 00:43:32,911 and see what it looks like, You know, property. 847 00:43:32,978 --> 00:43:35,647 And so it turns out if the world is true like that, 848 00:43:35,714 --> 00:43:37,148 there will be various kinds nice things 849 00:43:38,283 --> 00:43:39,885 Being an economist, uh, 850 00:43:40,852 --> 00:43:42,387 think about the world 851 00:43:42,453 --> 00:43:44,389 use, uh, model. 852 00:43:44,455 --> 00:43:46,191 And what does that mean? 853 00:43:46,257 --> 00:43:49,027 Okay, that's simplified version in the world, 854 00:43:49,094 --> 00:43:55,033 um, take one or two or Maybe three important features 855 00:43:55,100 --> 00:43:56,534 in the world 856 00:43:56,601 --> 00:43:59,604 and act as if it is the only characteristic of the world, 857 00:43:59,671 --> 00:44:01,339 and, and buildings-- 858 00:44:01,406 --> 00:44:05,610 build out consequences of that three kinds of features. 859 00:44:05,677 --> 00:44:07,178 The model is just a story. 860 00:44:07,245 --> 00:44:09,047 You know, they say, If you do this, 861 00:44:09,114 --> 00:44:11,049 it will happen. That is it. 862 00:44:11,116 --> 00:44:13,752 If you choose all three the most important features, 863 00:44:13,819 --> 00:44:15,086 then you have a good model. 864 00:44:15,153 --> 00:44:16,788 If you choose three features 865 00:44:16,855 --> 00:44:18,489 that doesn't really matter, 866 00:44:18,556 --> 00:44:20,158 then you have a model 867 00:44:20,225 --> 00:44:22,127 That doesn't really happen helps you with your problem 868 00:44:22,193 --> 00:44:24,930 This is useful - this is an intuition pump right? 869 00:44:24,996 --> 00:44:27,498 This helps you think about it why markets sometimes work really well, 870 00:44:27,565 --> 00:44:28,967 helps you think about something. 871 00:44:29,034 --> 00:44:31,636 But if you start to believe it this is not... 872 00:44:31,703 --> 00:44:33,671 help, ah, fairy tales, 873 00:44:33,739 --> 00:44:36,441 but actually the truth is, then you are in big trouble, 874 00:44:36,507 --> 00:44:38,443 because the world doesn't work like that, 875 00:44:38,509 --> 00:44:40,511 and at times like this, when depression, 876 00:44:40,578 --> 00:44:42,113 it really doesn't work like that 877 00:44:42,180 --> 00:44:45,016 So neoclassical economy is a potential trap 878 00:44:45,083 --> 00:44:47,485 So if I put it really the simplest, 879 00:44:47,552 --> 00:44:49,187 You build a model where you say, 880 00:44:49,254 --> 00:44:51,256 we consider depression not possible 881 00:44:51,322 --> 00:44:54,192 Unfortunately, is not the world in which we live. 882 00:44:54,259 --> 00:44:57,395 Conventional economists don't like debt models 883 00:44:57,462 --> 00:44:59,130 into their economic model 884 00:44:59,197 --> 00:45:02,768 because debt makes the model unstable, 885 00:45:02,834 --> 00:45:05,036 so they eliminate it altogether. 886 00:45:05,103 --> 00:45:08,406 This is modeling which is easier for the 887 00:45:08,473 --> 00:45:11,142 model not what happens in the real world 888 00:45:11,209 --> 00:45:14,412 They - they will not break up away from this 19th century, 889 00:45:14,479 --> 00:45:18,016 eh, heuristics they think 890 00:45:18,083 --> 00:45:19,785 will make it easier to solve problems. 891 00:45:19,851 --> 00:45:21,286 Actually, they have made it much more difficult, 892 00:45:21,352 --> 00:45:23,889 and that's why they don't know this crisis will come 893 00:45:23,955 --> 00:45:25,757 because they ignore banks, debts, and money. 894 00:45:29,294 --> 00:45:33,464 That is serious, serious professional problems 895 00:45:33,531 --> 00:45:34,800 We have a situation - 896 00:45:34,866 --> 00:45:37,235 to compare it with a doctor for a moment, 897 00:45:37,302 --> 00:45:38,536 real doctors 898 00:45:38,603 --> 00:45:43,641 We have a situation where patients bleed, 899 00:45:43,708 --> 00:45:46,945 but we don't really recognize the presence of blood 900 00:45:47,012 --> 00:45:49,247 Like, that's serious, you know. 901 00:45:49,314 --> 00:45:52,550 Why doesn't it appear? silly for economists 902 00:45:52,617 --> 00:45:54,519 to use the model without money? 903 00:45:54,585 --> 00:45:56,154 Uh, I'm an economist myself, 904 00:45:57,823 --> 00:46:00,591 So, at least there is an one exception to that, 905 00:46:00,658 --> 00:46:02,961 and some others to make sure 906 00:46:03,028 --> 00:46:05,864 This is very difficult to, uh, understand 907 00:46:05,931 --> 00:46:11,736 the reason why economists focus on models, 908 00:46:11,803 --> 00:46:13,704 uh, where is the crisis, 909 00:46:13,771 --> 00:46:16,174 uh, can't happen, 910 00:46:16,241 --> 00:46:17,542 not possible 911 00:46:17,608 --> 00:46:19,878 I think the economy has this lure 912 00:46:19,945 --> 00:46:21,947 that when we can explain something 913 00:46:22,013 --> 00:46:24,916 in a beautiful model, it's just elegant 914 00:46:24,983 --> 00:46:26,952 And you want the world to be elegant 915 00:46:27,018 --> 00:46:28,887 One dream 916 00:46:28,954 --> 00:46:30,822 * One soul 917 00:46:30,889 --> 00:46:32,958 One prize 918 00:46:33,024 --> 00:46:34,459 One goal 919 00:46:34,525 --> 00:46:35,793 One goal 920 00:46:35,861 --> 00:46:37,562 One gold stare 921 00:46:38,696 --> 00:46:40,798 * What should be 922 00:46:40,866 --> 00:46:42,400 * It's kind of magic * 923 00:46:42,467 --> 00:46:43,969 One axis 924 00:46:44,035 --> 00:46:45,670 * From light 925 00:46:45,736 --> 00:46:48,539 * That shows the way 926 00:46:49,740 --> 00:46:52,978 There are no mortals 927 00:46:53,879 --> 00:46:55,646 * Can win today 928 00:46:55,713 --> 00:46:57,182 * This is some kind of magic * 929 00:46:57,248 --> 00:47:00,785 Bells that ring 930 00:47:00,852 --> 00:47:04,622 * In your mind 931 00:47:04,689 --> 00:47:07,926 * Challenging 932 00:47:08,894 --> 00:47:10,461 * Door time 933 00:47:12,597 --> 00:47:15,333 * The wait seems to be 934 00:47:16,467 --> 00:47:18,203 * Eternity 935 00:47:20,071 --> 00:47:23,441 * Day will dawn 936 00:47:23,508 --> 00:47:26,044 * Sanitation 937 00:47:27,112 --> 00:47:33,251 * Is this some kind of magic? 938 00:47:33,318 --> 00:47:35,220 I think deregulation has about it 939 00:47:35,286 --> 00:47:36,888 a kind of natural bubble, 940 00:47:36,955 --> 00:47:38,990 that when you allow people 941 00:47:39,057 --> 00:47:40,892 a large amount of freedom, 942 00:47:40,959 --> 00:47:42,427 they enjoy it 943 00:47:45,964 --> 00:47:48,599 Key section the regulatory apparatus 944 00:47:48,666 --> 00:47:50,868 is being run by people 945 00:47:50,936 --> 00:47:53,204 who does not believe in their work 946 00:47:53,271 --> 00:47:54,805 They - they believe that their task is to 947 00:47:54,872 --> 00:47:56,074 out of the way of the bank, 948 00:47:56,141 --> 00:47:57,408 or for - or even to help the bank, 949 00:47:57,475 --> 00:48:00,478 but not for - not to protect us from - 950 00:48:00,545 --> 00:48:01,846 eh, from a bank jam. 951 00:48:01,913 --> 00:48:03,514 We have a banking system 952 00:48:03,581 --> 00:48:06,717 with regulators which encourages risk taking 953 00:48:06,784 --> 00:48:11,122 They are positively recommended and are rewarded for taking risks, 954 00:48:11,189 --> 00:48:13,591 and politicians stand up and say 955 00:48:13,658 --> 00:48:16,461 It's not just taking risks well, guys, 956 00:48:16,527 --> 00:48:18,829 they say risk taking is good. 957 00:48:18,896 --> 00:48:20,098 The more risky the better. 958 00:48:20,165 --> 00:48:23,134 * We believe everything 959 00:48:23,201 --> 00:48:26,938 * What is hunky-dory, that's our story * 960 00:48:27,005 --> 00:48:29,107 * All will work well * 961 00:48:29,174 --> 00:48:32,677 Like good wine, it only takes time * Market freedom is the problem 962 00:48:32,743 --> 00:48:35,413 * To cure all diseases and that is why we sing * 963 00:48:35,480 --> 00:48:38,483 Keep the market free, free, free * 964 00:48:38,549 --> 00:48:41,486 * For good, That is the only way to be * 965 00:48:41,552 --> 00:48:47,425 We have a free market ideology that says 966 00:48:47,492 --> 00:48:50,661 the more you delete country 967 00:48:50,728 --> 00:48:52,964 from the market, 968 00:48:53,031 --> 00:48:54,599 969 00:48:54,665 --> 00:48:58,003 more and more markets are allowed to do what they do, 970 00:48:58,069 --> 00:48:59,904 who is for - 971 00:48:59,971 --> 00:49:01,539 to bring millions of decisions 972 00:49:01,606 --> 00:49:04,009 by people, every day, together, 973 00:49:04,075 --> 00:49:06,111 in a way that provides rational results. 974 00:49:06,177 --> 00:49:09,480 So, the market Our collective rationality. 975 00:49:11,249 --> 00:49:13,751 I should Free market ideology 976 00:49:13,818 --> 00:49:17,655 is a place that you have a fundamental belief 977 00:49:17,722 --> 00:49:20,992 that market optimal way 978 00:49:21,059 --> 00:49:22,827 to create wealth 979 00:49:22,893 --> 00:49:27,465 and to distribute goods and services throughout the community. 980 00:49:27,532 --> 00:49:30,535 CASE: Alan Greenspan sort of exemplified his rise 981 00:49:30,601 --> 00:49:32,470 or comeback free market economy 982 00:49:32,537 --> 00:49:34,805 after that has been discredited in the 1930s. 983 00:49:34,872 --> 00:49:36,307 You can really track 984 00:49:36,374 --> 00:49:38,376 all of these increases through their actual careers. 985 00:49:38,443 --> 00:49:41,312 He is a man who has, for decades, 986 00:49:41,379 --> 00:49:43,948 Apply certain ways think. 987 00:49:44,015 --> 00:49:46,217 And... and he-- 988 00:49:46,284 --> 00:49:48,119 And he makes very important decisions 989 00:49:48,186 --> 00:49:50,655 affected world economy 990 00:49:50,721 --> 00:49:52,223 based on that framework. 991 00:49:52,290 --> 00:49:54,725 Alan Greenspan, I think, has deep conviction and deep 992 00:49:54,792 --> 00:49:56,761 lack of regulation. 993 00:49:56,827 --> 00:49:58,063 Right? And, so, basically, 994 00:49:58,129 --> 00:49:59,830 many eliminated from regulations, 995 00:49:59,897 --> 00:50:02,100 allows all economic agents 996 00:50:02,167 --> 00:50:04,202 to act according to their wishes. 997 00:50:04,269 --> 00:50:06,737 And the framework is assumed that-- 998 00:50:06,804 --> 00:50:09,907 that agents in the economy rational... 999 00:50:09,974 --> 00:50:11,576 including banks. 1000 00:50:11,642 --> 00:50:14,779 There is a book called Maestro written about him, 1001 00:50:14,845 --> 00:50:16,847 describe it as a genius 1002 00:50:16,914 --> 00:50:19,050 because I don't listen to for naysayers 1003 00:50:19,117 --> 00:50:21,452 who said, "You have to slow down this expansion." 1004 00:50:25,290 --> 00:50:26,957 KRUGMAN: The accident, Even though, the proof is 1005 00:50:27,024 --> 00:50:28,859 Greenspan's view the market 1006 00:50:28,926 --> 00:50:31,362 self-policing, self-regulation all wrong 1007 00:50:31,429 --> 00:50:34,031 CASSIDY: So, he was transported before Congress, you know, 1008 00:50:34,099 --> 00:50:36,534 say, all right, you know, "you've told us all for years 1009 00:50:36,601 --> 00:50:38,636 we don't need financial rules, 1010 00:50:38,703 --> 00:50:40,338 we don't need to worry about the market 1011 00:50:40,405 --> 00:50:43,341 what's wrong? Is there wrong? " And he said, "Some. Something is wrong." 1012 00:50:43,408 --> 00:50:46,977 And they say, "What are you going to do?" I mean Mr. Greenspan? 1013 00:50:47,044 --> 00:50:49,347 You know, uh, What's wrong? " You find a defect in... reality-- 1014 00:50:49,414 --> 00:50:52,283 GREENSPAN: One defect in the model that I consider 1015 00:50:52,350 --> 00:50:55,420 as a critical functioning structure 1016 00:50:55,486 --> 00:50:57,588 1017 00:50:57,655 --> 00:51:01,592 1018 00:51:01,659 --> 00:51:03,594 which defines how the world works, so to speak 1019 00:51:03,661 --> 00:51:05,530 In other words, you find that you - 1020 00:51:05,596 --> 00:51:08,666 your view of the world, Your ideology is not correct. 1021 00:51:08,733 --> 00:51:10,701 -It doesn't work -GREENSPAN: That's all How do I-- 1022 00:51:10,768 --> 00:51:12,002 Right. You know, I - 1023 00:51:12,069 --> 00:51:13,838 Exactly the reason I was shocked 1024 00:51:13,904 --> 00:51:17,242 because I've been away for 40 years or more 1025 00:51:17,308 --> 00:51:19,144 with very much evidence 1026 00:51:19,210 --> 00:51:20,878 that's all works really well. 1027 00:51:20,945 --> 00:51:23,914 It's quite amazing when he says that My view of the world is wrong 1028 00:51:23,981 --> 00:51:26,251 that is a shocking confession, 1029 00:51:26,317 --> 00:51:28,319 an indication that... 1030 00:51:28,386 --> 00:51:29,720 There might be some-- 1031 00:51:29,787 --> 00:51:32,223 some humility and hope for redemption 1032 00:51:32,290 --> 00:51:34,024 um, in Mr. Greenspan, 1033 00:51:34,091 --> 00:51:35,826 which turns out to be incorrect. 1034 00:51:35,893 --> 00:51:38,529 Uh, right away, he went straight back 1035 00:51:38,596 --> 00:51:40,298 utter very sure 1036 00:51:40,365 --> 00:51:43,000 and perfect errors about everything. 1037 00:51:43,067 --> 00:51:45,936 CUSACK: We really, sort of, make people like Greenspan 1038 00:51:46,003 --> 00:51:47,605 this, sort of, holy bishop, 1039 00:51:47,672 --> 00:51:50,541 and each word their words are strengthened. 1040 00:51:50,608 --> 00:51:53,077 I mean, they are or something whales, or cardinals. 1041 00:51:53,144 --> 00:51:54,712 And, so, I think for this person 1042 00:51:54,779 --> 00:51:56,514 to come - let's and I must admit 1043 00:51:56,581 --> 00:52:00,551 it's basically everything that he believes is wrong, 1044 00:52:00,618 --> 00:52:04,889 um, just show it this is - this is a joke 1045 00:52:04,955 --> 00:52:07,558 You are all individuals! 1046 00:52:07,625 --> 00:52:11,061 ALL: Yes! We are all individuals! 1047 00:52:11,128 --> 00:52:12,930 You are all different! 1048 00:52:12,997 --> 00:52:16,267 Yes! We are all different. 1049 00:52:16,334 --> 00:52:18,736 -MAN: I don't. -ALL: sst! Shh! 1050 00:52:18,803 --> 00:52:22,807 If you try and read economics pure rational, 1051 00:52:22,873 --> 00:52:24,842 I think it's a real mistake because 1052 00:52:24,909 --> 00:52:28,613 the economy operates with a herd mentality, of course. 1053 00:52:28,679 --> 00:52:31,349 But it is a flock made very human 1054 00:52:31,416 --> 00:52:33,884 You know, are complicated, and sometimes irrational. 1055 00:52:33,951 --> 00:52:36,254 I think the market is not our collective rationality. 1056 00:52:36,321 --> 00:52:40,325 It could be, but it can also our collective irrationality, 1057 00:52:40,391 --> 00:52:42,193 and what's wrong with the economy 1058 00:52:42,260 --> 00:52:44,695 is it ruled out Possible 1059 00:52:44,762 --> 00:52:46,331 irrational results 1060 00:52:46,397 --> 00:52:48,366 That is the problem free market economy 1061 00:52:48,433 --> 00:52:50,368 This is a kind of ideology, 1062 00:52:50,435 --> 00:52:52,903 and once you start believing it, um, 1063 00:52:52,970 --> 00:52:55,940 it sort of gives sort of framework 1064 00:52:56,006 --> 00:52:57,642 to explain the world. 1065 00:52:57,708 --> 00:53:00,611 And such people are trapped inside them Ideology itself, really. 1066 00:53:01,646 --> 00:53:03,180 JONES: I think it's time 1067 00:53:03,248 --> 00:53:07,017 for human nature into the economy. 1068 00:53:07,084 --> 00:53:08,786 We come to Puerto Rico 1069 00:53:08,853 --> 00:53:13,258 to go to the island, There, Kera Island. 1070 00:53:13,324 --> 00:53:16,427 Monkey Island is very funny place in Puerto Rico. 1071 00:53:16,494 --> 00:53:18,696 This is an island not far from there southeast coast 1072 00:53:18,763 --> 00:53:21,065 it's home for around thousand free rhesus monkeys 1073 00:53:21,131 --> 00:53:23,100 This is a beautiful place for 1074 00:53:23,167 --> 00:53:24,535 really observe monkey behavior in the wild 1075 00:53:24,602 --> 00:53:26,604 and organize studies to study 1076 00:53:26,671 --> 00:53:28,406 how irrational they are sometimes 1077 00:53:28,473 --> 00:53:29,874 I thought, Because I studied monkeys, 1078 00:53:29,940 --> 00:53:31,409 people think I'm interested in monkeys. 1079 00:53:31,476 --> 00:53:33,411 But really, I'm interested in people, 1080 00:53:33,478 --> 00:53:35,446 and I found that this amazing window monkey 1081 00:53:35,513 --> 00:53:36,947 what kind of person is that. 1082 00:53:37,014 --> 00:53:39,116 You are here, You see them, like, 1083 00:53:39,183 --> 00:53:40,785 associating with their friends, and men, 1084 00:53:40,851 --> 00:53:42,920 and try to get power, and get resources, And like, 1085 00:53:42,987 --> 00:53:45,423 only a few of these evolutionary microcosm 1086 00:53:45,490 --> 00:53:48,426 of what we like without language and cellphone 1087 00:53:48,493 --> 00:53:50,628 and all this 21st century. 1088 00:53:50,695 --> 00:53:52,229 One of the things we really want to do it 1089 00:53:52,297 --> 00:53:53,298 to understand human choices 1090 00:53:53,364 --> 00:53:54,865 is to see if monkeys will make 1091 00:53:54,932 --> 00:53:56,867 some smart decisions that are the same and bad decisions. 1092 00:53:56,934 --> 00:54:00,871 This tells us something about where we came from evolutionarily 1093 00:54:00,938 --> 00:54:04,041 and how we are designed to make decisions. 1094 00:54:04,108 --> 00:54:05,343 So we introduce monkeys 1095 00:54:05,410 --> 00:54:07,545 for them have a new monkey currency 1096 00:54:07,612 --> 00:54:09,314 I'm here. This is a monkey - 1097 00:54:09,380 --> 00:54:10,781 It's a little bite on it 1098 00:54:10,848 --> 00:54:12,317 Um, but this is monkey currency 1099 00:54:12,383 --> 00:54:13,751 We give it to them and teach them 1100 00:54:13,818 --> 00:54:15,786 they can exchange with humans for food. 1101 00:54:15,853 --> 00:54:20,124 I believe it is only a non-human currency in the world. 1102 00:54:20,190 --> 00:54:22,393 This is actually. This might be very - This is very valuable, 1103 00:54:22,460 --> 00:54:23,894 so I will save it in my pocket 1104 00:54:25,430 --> 00:54:26,664 SANTOS: First they only trade with one person 1105 00:54:26,731 --> 00:54:28,433 They managed to do it. And now, 1106 00:54:28,499 --> 00:54:29,967 they get real, people's choices, 1107 00:54:30,034 --> 00:54:32,370 and they can choose the they want to sell. 1108 00:54:32,437 --> 00:54:34,372 And everyone on the market, sort of, 1109 00:54:34,439 --> 00:54:35,573 shows monkeys, on small plates, 1110 00:54:35,640 --> 00:54:36,841 You know, "Here it is what can you buy? 1111 00:54:36,907 --> 00:54:38,643 And then, uh, the monkey can only choose 1112 00:54:38,709 --> 00:54:40,511 And they have a little token wallet 1113 00:54:40,578 --> 00:54:43,414 that they can, sort of, spend between researchers. 1114 00:54:43,481 --> 00:54:45,650 Monkeys meet researchers 1115 00:54:45,716 --> 00:54:47,352 who don't always give 1116 00:54:47,418 --> 00:54:48,886 the same amount of food they show 1117 00:54:48,953 --> 00:54:50,588 So, they have one amount of food on their plate, 1118 00:54:50,655 --> 00:54:53,090 But then, they can, like, vary from time to time. 1119 00:54:53,157 --> 00:54:54,892 Um, so, monkey can, uh, say, 1120 00:54:54,959 --> 00:54:56,361 meet with an experiment 1121 00:54:56,427 --> 00:54:58,228 that looks like he sells one wine, 1122 00:54:58,295 --> 00:54:59,530 which seems like a pretty good deal, 1123 00:54:59,597 --> 00:55:01,065 but every time monkey pays him, 1124 00:55:01,131 --> 00:55:02,700 Monkeys really get two. 1125 00:55:02,767 --> 00:55:05,035 So, the monkey likes, "Wow, this is great..., right?" 1126 00:55:05,102 --> 00:55:07,237 Monkeys also meet These other people and they realize 1127 00:55:07,304 --> 00:55:08,639 this person starts with three grapes 1128 00:55:08,706 --> 00:55:09,974 He looks like he's really good 1129 00:55:10,040 --> 00:55:11,642 But every time monkeys pay him, 1130 00:55:11,709 --> 00:55:14,044 he took one away to give the monkey only two. 1131 00:55:14,111 --> 00:55:16,714 Now, these two people, men who, you know, 1132 00:55:16,781 --> 00:55:19,316 It looks like he gave it but he gave two, 1133 00:55:19,384 --> 00:55:21,752 versus a man who looks like he gives three but gives two, 1134 00:55:21,819 --> 00:55:23,821 they finally Give the monkey two, right? 1135 00:55:23,888 --> 00:55:25,423 If the monkey is being rational, 1136 00:55:25,490 --> 00:55:27,224 he will only shop randomly between the two 1137 00:55:27,291 --> 00:55:29,360 But what we find is that the monkeys are 1138 00:55:29,427 --> 00:55:30,961 very much shopping to people 1139 00:55:31,028 --> 00:55:32,630 starts with one and gives them two - 1140 00:55:32,697 --> 00:55:34,331 the person who looks like he gives a bonus-- 1141 00:55:34,399 --> 00:55:35,766 although, in fact, 1142 00:55:35,833 --> 00:55:37,301 monkeys increasingly same amount of food 1143 00:55:37,368 --> 00:55:39,537 JONES: I will return to the 2008 crash 1144 00:55:39,604 --> 00:55:42,573 What's the effect? who is in your research? 1145 00:55:42,640 --> 00:55:44,008 Often when you study monkeys, 1146 00:55:44,074 --> 00:55:46,644 You are learning, uh, can a monkey do it 1147 00:55:46,711 --> 00:55:48,245 all the smart things that humans do 1148 00:55:48,312 --> 00:55:49,747 like tool and language usage 1149 00:55:49,814 --> 00:55:52,717 and all this very smart thing what people do 1150 00:55:52,783 --> 00:55:54,952 And often, the monkeys come a little short 1151 00:55:55,019 --> 00:55:57,622 And, indeed a game-changer for research 1152 00:55:59,824 --> 00:56:02,793 not "Are monkeys similar? to humans because monkeys are very smart?" 1153 00:56:02,860 --> 00:56:05,329 We can ask, "Are monkeys similar to humans 1154 00:56:05,396 --> 00:56:06,864 because in some cases they are so stupid?" 1155 00:56:06,931 --> 00:56:09,033 Uh, my colleague, Keith Chen, likes to say, 1156 00:56:09,099 --> 00:56:10,935 You know, if you plan it monkey data 1157 00:56:11,001 --> 00:56:13,037 and you don't know the data comes from monkeys, 1158 00:56:13,103 --> 00:56:16,407 You will only expect they come from the real human market. 1159 00:56:16,474 --> 00:56:17,908 Human strategy we see 1160 00:56:17,975 --> 00:56:21,345 in the real market, evolutionary is really old 1161 00:56:21,412 --> 00:56:24,549 They are types of residual strategies from 35 million years ago. 1162 00:56:26,383 --> 00:56:27,585 KAHNEMAN: Not just people 1163 00:56:27,652 --> 00:56:30,988 results of values as gains and losses, 1164 00:56:31,055 --> 00:56:33,858 they value losses far more than profit. 1165 00:56:33,924 --> 00:56:36,060 But that leads to this bias is where the loss is, 1166 00:56:36,126 --> 00:56:37,928 this change that goes in a negative direction, 1167 00:56:37,995 --> 00:56:39,430 we go in red, 1168 00:56:39,497 --> 00:56:41,799 they just feel emotional stronger 1169 00:56:41,866 --> 00:56:44,101 rather than this change in a positive direction, 1170 00:56:44,168 --> 00:56:46,236 and that can lead us to do all kinds of crazy things. 1171 00:56:46,303 --> 00:56:48,338 We are very trying to avoid this 1172 00:56:48,405 --> 00:56:50,340 relatively small changes in red 1173 00:56:50,407 --> 00:56:52,309 that we do something like taking more risks. 1174 00:56:52,376 --> 00:56:54,344 JONES: What can we do? do it? 1175 00:56:54,411 --> 00:56:57,114 SANTOS: The idea is that we just have to acknowledge that we have this bias, 1176 00:56:57,181 --> 00:56:59,517 that they are old and difficult to get rid of, 1177 00:56:59,584 --> 00:57:00,851 and then we sort of have to design a policy 1178 00:57:00,918 --> 00:57:02,587 and the market and the system around them 1179 00:57:02,653 --> 00:57:04,489 I am quite skeptical 1180 00:57:04,555 --> 00:57:06,390 about the idea 1181 00:57:06,457 --> 00:57:08,559 individuals can make themselves smarter 1182 00:57:08,626 --> 00:57:11,729 or can make them de-bias themselves. 1183 00:57:11,796 --> 00:57:13,631 A little, not much. 1184 00:57:13,698 --> 00:57:15,900 In addition, I think the organization, 1185 00:57:15,966 --> 00:57:18,903 if they are very aware of what they want to achieve, 1186 00:57:18,969 --> 00:57:21,672 they are, very likely, can be placed 1187 00:57:21,739 --> 00:57:23,741 procedures that will Protect them 1188 00:57:23,808 --> 00:57:25,676 of various types of errors 1189 00:57:25,743 --> 00:57:29,279 We change the system not our behavior. 1190 00:57:29,346 --> 00:57:31,348 Yes, like, I mean, We have this strategy 1191 00:57:31,415 --> 00:57:32,783 for 35 million years. 1192 00:57:32,850 --> 00:57:36,153 That is evolution very large amount of time 1193 00:57:36,220 --> 00:57:37,855 We will not be fair sort of put them aside 1194 00:57:37,922 --> 00:57:39,724 because in 2008, we did some stupid things 1195 00:57:39,790 --> 00:57:41,592 Like, those things are here to stay 1196 00:57:41,659 --> 00:57:42,927 We will be much better 1197 00:57:42,993 --> 00:57:45,129 if we change the system around the bias. 1198 00:57:45,195 --> 00:57:46,797 So, hey, we're not rational, 1199 00:57:46,864 --> 00:57:49,033 but we can be smart enough to set the system 1200 00:57:49,099 --> 00:57:50,467 to enable us to develop 1201 00:57:50,535 --> 00:57:53,337 even though we have this bias is a little stupid 1202 00:57:53,403 --> 00:57:55,205 The real problem here 1203 00:57:55,272 --> 00:57:57,241 is not a particular event 1204 00:57:57,307 --> 00:57:59,910 that starts Accidents in 2008, 1205 00:57:59,977 --> 00:58:03,581 The real problem is the way The banking system is designed. 1206 00:58:03,648 --> 00:58:05,315 There are two things, really, about that 1207 00:58:05,382 --> 00:58:06,784 I mean, one is to understand 1208 00:58:06,851 --> 00:58:09,353 systemic nature financial instability 1209 00:58:09,419 --> 00:58:11,255 But another part of that, Actually, that's right 1210 00:58:11,321 --> 00:58:12,657 if you understand 1211 00:58:12,723 --> 00:58:14,759 systemic nature instability, 1212 00:58:14,825 --> 00:58:17,361 Then, many other things must change 1213 00:58:17,427 --> 00:58:19,129 If you have already been determined 1214 00:58:19,196 --> 00:58:21,632 to ensure that - does not return 1215 00:58:21,699 --> 00:58:24,368 uh, you know, within ten or 15 years and - 1216 00:58:24,434 --> 00:58:26,036 and bite you on the back again 1217 00:58:26,103 --> 00:58:28,238 We have come, as humans, 1218 00:58:28,305 --> 00:58:31,375 with the most fragile designs financial system 1219 00:58:31,441 --> 00:58:33,310 we might be able to think. 1220 00:58:33,377 --> 00:58:35,646 So, we need to rethink 1221 00:58:35,713 --> 00:58:38,515 what we need a financial system for, 1222 00:58:38,583 --> 00:58:40,585 and then design one 1223 00:58:40,651 --> 00:58:44,454 which will, uh, provide various functions. 1224 00:58:44,521 --> 00:58:47,558 And that might mean separating 1225 00:58:47,625 --> 00:58:50,194 retail, basic banking goods, 1226 00:58:50,260 --> 00:58:53,130 from somewhat higher-octane investment banking goods 1227 00:58:53,197 --> 00:58:54,398 And then, we can have it 1228 00:58:54,464 --> 00:58:56,433 other parts of the financial system 1229 00:58:56,500 --> 00:58:57,635 it's a riskier item, 1230 00:58:57,702 --> 00:58:59,403 but we don't allow them 1231 00:58:59,469 --> 00:59:00,971 for, you know, take 1232 00:59:01,038 --> 00:59:03,207 funds away from households, 1233 00:59:03,273 --> 00:59:05,109 from the company, from pension funds. 1234 00:59:05,175 --> 00:59:07,144 We can redesign cars, 1235 00:59:07,211 --> 00:59:10,581 so why don't we redesign economic system? 1236 00:59:10,648 --> 00:59:12,917 I got a hundred dollar check from my grandmother, 1237 00:59:12,983 --> 00:59:14,384 and my dad says I need to put it in the bank 1238 00:59:14,451 --> 00:59:15,552 so that it can grow for years. 1239 00:59:15,620 --> 00:59:17,487 Well, that's fantastic. 1240 00:59:17,554 --> 00:59:19,056 A very smart decision, youth. 1241 00:59:19,123 --> 00:59:22,226 We can check it in money market funds. 1242 00:59:22,292 --> 00:59:25,062 Then we will reinvest incoming income foreign currency account 1243 00:59:25,129 --> 00:59:28,065 with compound interest, and that is missing 1244 00:59:35,105 --> 00:59:36,373 Uh, what? 1245 00:59:36,440 --> 00:59:38,042 It's gone. Everything has disappeared. 1246 00:59:39,844 --> 00:59:41,646 -What is missing? - Money in your account 1247 00:59:41,712 --> 00:59:43,814 That doesn't work well. It's gone. 1248 00:59:43,881 --> 00:59:45,883 What do you mean? I - I have a hundred dollars! 1249 00:59:45,950 --> 00:59:47,885 No longer no. Poof. 1250 00:59:49,920 --> 00:59:51,455 Well... But what can I do to get me back - 1251 00:59:51,521 --> 00:59:54,224 Sorry, sir, but this line is only for bank members. 1252 00:59:54,291 --> 00:59:55,559 I just opened an account. 1253 00:59:55,626 --> 00:59:57,662 Do you have money? invested with this bank? 1254 00:59:57,728 --> 00:59:58,829 No, you just lost everything. 1255 00:59:58,896 --> 01:00:00,631 Then please stand beside for people 1256 01:00:00,698 --> 01:00:02,532 who actually have money with us. Next, please. 1257 01:00:02,599 --> 01:00:04,501 Today there, crisis in particular 1258 01:00:04,568 --> 01:00:08,005 has caused many students want to study economics 1259 01:00:08,072 --> 01:00:10,975 This happens with Depression generations too. 1260 01:00:11,041 --> 01:00:13,477 Many people, like Hyman Minsky, 1261 01:00:13,543 --> 01:00:14,979 enter the economy 1262 01:00:15,045 --> 01:00:17,114 because of that experience their childhood 1263 01:00:17,181 --> 01:00:18,816 They feel this is something important they need to understand. 1264 01:00:18,883 --> 01:00:21,085 They don't find the economy that they are taught 1265 01:00:21,151 --> 01:00:23,387 very helpful 1266 01:00:23,453 --> 01:00:24,822 Ph.D. average. economists will train for five years, 1267 01:00:29,359 --> 01:00:33,263 and they will never learn anything about history 1268 01:00:33,330 --> 01:00:37,234 from the economic system who have overtaken them. 1269 01:00:37,301 --> 01:00:40,270 If you will spend class, uh, for a full semester, 1270 01:00:40,337 --> 01:00:43,473 and you learn about one financial crisis after another, 1271 01:00:43,540 --> 01:00:46,543 that might happen to that student 1272 01:00:46,610 --> 01:00:48,212 the financial crisis regular parts of the economy, 1273 01:00:48,278 --> 01:00:50,981 1274 01:00:51,048 --> 01:00:54,351 whereas if not really makes it focus and you mention, 1275 01:00:54,418 --> 01:00:57,554 "Yeah, oh, yes, there is a crisis here, there is a crisis there," 1276 01:00:57,621 --> 01:01:01,692 This is much easier to convince a student that the crisis is not natural, 1277 01:01:01,759 --> 01:01:03,593 it's wrong from a government 1278 01:01:03,660 --> 01:01:05,095 or certain actions 1279 01:01:05,162 --> 01:01:08,065 which causes the crisis in This strange situation, 1280 01:01:08,132 --> 01:01:11,101 But it's not normal economic tendency. 1281 01:01:29,086 --> 01:01:32,256 WOMAN: We are all students at Manchester University, 1282 01:01:32,322 --> 01:01:34,925 and we are members of the Post Crash Economics Society. 1283 01:01:34,992 --> 01:01:37,127 We arranged it at the end of last year 1284 01:01:37,194 --> 01:01:39,930 Because we feel that we economic education so far 1285 01:01:39,997 --> 01:01:42,032 is quite limited 1286 01:01:42,099 --> 01:01:43,934 One of the main issues is the economy 1287 01:01:44,001 --> 01:01:45,669 has been caught in this trap where... 1288 01:01:45,736 --> 01:01:49,073 uh... Funding for universities is fully determined, 1289 01:01:49,139 --> 01:01:51,942 good, generally is determined by research. 1290 01:01:52,009 --> 01:01:53,778 And the research will be published 1291 01:01:53,844 --> 01:01:56,246 is the mainstream, is a neoclassical economy. 1292 01:01:56,313 --> 01:01:58,348 As a result, that's how we are taught The beauty of science, from true science, physics, chemistry, 1293 01:01:58,415 --> 01:02:01,718 is that there is - There is a debate between the key theory, 1294 01:02:01,786 --> 01:02:04,288 between, you know, different ideas 1295 01:02:04,354 --> 01:02:06,423 Whereas, in the economic field, the debate is simple not big enough, 1296 01:02:06,490 --> 01:02:08,592 1297 01:02:08,658 --> 01:02:11,028 or it's not big enough, and that's what we fight for 1298 01:02:11,095 --> 01:02:15,966 Our education produces economists who believes it? 1299 01:02:16,033 --> 01:02:19,236 their type of economy is the only way to do the economy. 1300 01:02:19,303 --> 01:02:21,138 I mean, there are very few of our titles which is devoted to analyze 1301 01:02:21,205 --> 01:02:23,673 what happened in 2008 and what happened in the 1920s, 1302 01:02:23,740 --> 01:02:27,277 which I think should be a fundamental part from any economic level. 1303 01:02:27,344 --> 01:02:30,647 -Yes. -It's a shame... 1304 01:02:30,714 --> 01:02:32,382 go home and people ask, "Oh, so you do the economy? 1305 01:02:32,449 --> 01:02:36,053 What happened in 2008?" 1306 01:02:36,120 --> 01:02:37,754 1307 01:02:37,822 --> 01:02:39,323 And I can't tell them. 1308 01:02:39,389 --> 01:02:42,192 What I think we all like to see is, you know, 1309 01:02:42,259 --> 01:02:45,062 economists with critical minds out of university, 1310 01:02:45,129 --> 01:02:47,798 and enter the city and become a public policy. 1311 01:02:47,865 --> 01:02:49,266 And you will have-- and hopefully you-- 1312 01:02:49,333 --> 01:02:51,368 You will have a policy that reflects too. 1313 01:02:51,435 --> 01:02:54,204 You will have financial sector that reflects that 1314 01:02:54,271 --> 01:02:58,042 not only, you know, this one-dimensional myopia. 1315 01:02:58,108 --> 01:03:01,411 We want to be economists and we want to see economists 1316 01:03:01,478 --> 01:03:02,913 leaving university 1317 01:03:02,980 --> 01:03:05,482 who can engage with the real world economy, 1318 01:03:05,549 --> 01:03:08,252 while now we don't feel we can. 1319 01:03:08,318 --> 01:03:11,188 That's what we think is an economic point. 1320 01:03:11,255 --> 01:03:13,257 I think it's kind of lost somewhere. 1321 01:03:29,106 --> 01:03:32,076 The way you change economic teachings 1322 01:03:32,142 --> 01:03:33,777 is changing the teacher. 1323 01:03:33,844 --> 01:03:35,212 It's that simple 1324 01:03:35,279 --> 01:03:38,048 You won't enter a situation where... 1325 01:03:38,115 --> 01:03:42,686 teachers who spend decades build skills 1326 01:03:42,752 --> 01:03:45,489 in a very primary approach will only say, 1327 01:03:45,555 --> 01:03:47,424 "Oh, yes, that's right all waste time. 1328 01:03:47,491 --> 01:03:49,927 I will go do something else." They don't want to. 1329 01:03:49,994 --> 01:03:51,628 Right. Now, listen. 1330 01:03:51,695 --> 01:03:54,298 (grunt) 1331 01:03:56,333 --> 01:03:59,769 So, what I think is, professors 1332 01:03:59,836 --> 01:04:03,073 start parachute this party line 1333 01:04:03,140 --> 01:04:04,674 I think you should just be Their pelt with vegetables 1334 01:04:04,741 --> 01:04:07,677 and rotten fruit, and maybe urinate on them. 1335 01:04:07,744 --> 01:04:09,846 That's what I mean, That is what I will do. 1336 01:04:13,217 --> 01:04:16,553 And there must be a different approach _ how this is taught. 1337 01:04:16,620 --> 01:04:18,855 It should not be taught as a branch of physics. 1338 01:04:18,923 --> 01:04:20,690 It must be taught As part of history, 1339 01:04:20,757 --> 01:04:24,794 or as an economic idea again is a social thought. 1340 01:04:24,861 --> 01:04:26,931 This is something that we all do together. 1341 01:04:26,997 --> 01:04:29,967 I - I at a conference once 1342 01:04:30,034 --> 01:04:32,736 with, uh, economist from Freddie Mac 1343 01:04:32,802 --> 01:04:37,174 That was one of the agencies that failed in the 2008 crisis I asked him about-- this is before the crisis what kind of planning 1344 01:04:37,241 --> 01:04:39,843 they have done it for a crisis 1345 01:04:39,910 --> 01:04:41,711 And he said with confidence, "We planned it. 1346 01:04:41,778 --> 01:04:43,847 So, we already know what will happen to us 1347 01:04:43,914 --> 01:04:47,451 even if the house price falls dramatically, 1348 01:04:47,517 --> 01:04:50,287 and we will do it congratulations from the storm 1349 01:04:50,354 --> 01:04:53,723 And I said, "Okay, how much dramatically? 1350 01:04:53,790 --> 01:04:56,160 He said, "We already know 1351 01:04:56,226 --> 01:04:58,162 1352 01:04:58,228 --> 01:05:00,030 1353 01:05:00,097 --> 01:05:05,735 what will happen to us If home prices fall 13%. " 1354 01:05:05,802 --> 01:05:09,806 And I said," Well, what if they fall more than 13%? " 1355 01:05:09,873 --> 01:05:11,942 And then, he said, " What do you mean? 1356 01:05:12,009 --> 01:05:13,978 They never fall a lot. " 1357 01:05:14,044 --> 01:05:16,480 He said," Well, not since then Great Depression. " 1358 01:05:16,546 --> 01:05:18,182 One of the things that we learn 1359 01:05:18,248 --> 01:05:20,450 from research history 1360 01:05:20,517 --> 01:05:23,820 is that people learn nothing from history, 1361 01:05:23,887 --> 01:05:27,657 or they tend to repeat past mistakes, 1362 01:05:27,724 --> 01:05:31,595 and I think that's because human nature. 1363 01:05:31,661 --> 01:05:33,964 (playing music) 1364 01:05:35,499 --> 01:05:40,337 * We are here forever blowing bubbles * 1365 01:05:40,404 --> 01:05:43,773 Enough bubbles in the air * 1366 01:05:43,840 --> 01:05:46,676 They fly very high 1367 01:05:46,743 --> 01:05:48,578 * Almost to the sky 1368 01:05:48,645 --> 01:05:51,781 They are like my dreams they fade and die * 1369 01:05:51,848 --> 01:05:53,117 (groaning) 1370 01:05:53,183 --> 01:05:57,821 * Fortune is always hiding * 1371 01:05:57,887 --> 01:06:02,159 * We have seen everywhere * 1372 01:06:02,226 --> 01:06:06,063 * We are forever blowing bubbles * 1373 01:06:06,130 --> 01:06:10,900 Enough bubbles in the air * 1374 01:06:10,967 --> 01:06:13,303 * We dream of dreams * 1375 01:06:13,370 --> 01:06:15,405 * We plan the scheme * 1376 01:06:15,472 --> 01:06:19,876 * We are building high castle * 1377 01:06:19,943 --> 01:06:22,112 * They are born new * 1378 01:06:22,179 --> 01:06:24,248 * Their days are a little 1379 01:06:24,314 --> 01:06:26,883 * Like Sweet butterflies * 1380 01:06:26,950 --> 01:06:28,352 (sighs) 1381 01:06:28,418 --> 01:06:33,090 * And as daytime is dawn * 1382 01:06:33,157 --> 01:06:37,727 They come again in the morning * 1383 01:06:40,530 --> 01:06:45,269 * We are forever blowing bubbles * 1384 01:06:45,335 --> 01:06:50,340 Enough bubbles in the air * 1385 01:06:50,407 --> 01:06:53,443 They fly very high 1386 01:06:53,510 --> 01:06:55,512 * Almost to the sky 1387 01:06:55,579 --> 01:07:00,917 They are like my dreams they fade and die * 1388 01:07:00,984 --> 01:07:05,455 * Belongs to Fortune always hide * 1389 01:07:05,522 --> 01:07:11,128 We have seen everywhere * 1390 01:07:11,195 --> 01:07:15,165 * We are forever blowing bubbles * 1391 01:07:15,232 --> 01:07:20,237 Enough bubbles in the air * 1392 01:07:21,705 --> 01:07:25,041 * We are forever blowing bubbles * 1393 01:07:25,109 --> 01:07:26,610 * Two, three, four 1394 01:07:26,676 --> 01:07:30,247 Enough bubbles in the air * 1395 01:07:31,181 --> 01:07:33,483 They fly very high 1396 01:07:33,550 --> 01:07:36,019 * Almost reach sky * 1397 01:07:36,086 --> 01:07:37,987 * Then like my dreams * 1398 01:07:38,054 --> 01:07:41,191 They fade and die * 1399 01:07:41,258 --> 01:07:46,363 * Belongs to Fortune always hide * 1400 01:07:46,430 --> 01:07:51,268 - * We have seen everywhere * - (groaning) 1401 01:07:51,335 --> 01:07:55,605 * We are forever blowing bubbles * 1402 01:07:55,672 --> 01:08:00,677 Enough bubbles in the air * 1403 01:08:00,744 --> 01:08:07,184 Enough bubbles in the air * 1404 01:08:11,321 --> 01:08:13,357 * Yes 1405 01:08:15,225 --> 01:08:17,261 (playing music) 1406 01:08:19,796 --> 01:08:21,865 * Financial instability hypothesis * 1407 01:08:21,931 --> 01:08:24,000 Boom boom boom boom 1408 01:08:24,067 --> 01:08:26,403 I need crystals drop and poppin '* 1409 01:08:26,470 --> 01:08:28,472 I have diamonds rockin 'rockin' * 1410 01:08:28,538 --> 01:08:30,574 * Boom boom boom keep bumpin '* 1411 01:08:30,640 --> 01:08:32,676 * Minsky is not a fool, said something '* 1412 01:08:32,742 --> 01:08:34,778 * Greedy bastards need to hear * 1413 01:08:34,844 --> 01:08:37,013 * Damn happens here all year long * 1414 01:08:37,080 --> 01:08:39,383 Bubble 'Blowin' more 'ninja loan * 1415 01:08:39,449 --> 01:08:41,685 Maybe greed only in bones * 1416 01:08:41,751 --> 01:08:43,687 * Blowin 'bubbles More' Ninja loans * 1417 01:08:43,753 --> 01:08:45,989 Maybe greed only in bones * 1418 01:08:46,055 --> 01:08:49,959 Boom bust bust bust 1419 01:08:50,026 --> 01:08:52,229 * Leaving the ghost town of a brother 1420 01:08:52,296 --> 01:08:54,864 * Negative equity drops 1421 01:08:54,931 --> 01:08:58,602 Boom bust bust bust 1422 01:08:58,668 --> 01:09:01,104 Subprime toxic in the city center 1423 01:09:01,171 --> 01:09:03,006 * Dip twice, triple-A meltdown * 1424 01:09:03,072 --> 01:09:05,175 * Piles of tulip maniacs, free market brains * 1425 01:09:05,242 --> 01:09:07,811 * Wall Street Apes buy ' two-for-one wine sales * 1426 01:09:07,877 --> 01:09:09,913 * Don't ever learn only turnin '* 1427 01:09:09,979 --> 01:09:12,015 Stamping the paper on the bridge then burning it * 1428 01:09:12,081 --> 01:09:14,384 - Give me, gimme it - * Money money 1429 01:09:14,451 --> 01:09:16,553 - * Need to get it - * Money money 1430 01:09:16,620 --> 01:09:18,622 - * I want to get that - * Money money 1431 01:09:18,688 --> 01:09:20,824 - Give me, gimme it - * Money money 1432 01:09:20,890 --> 01:09:23,193 * Blowing bubbles increasingly 'ninja loans * 1433 01:09:23,260 --> 01:09:25,329 Maybe greed only in bones * 1434 01:09:25,395 --> 01:09:27,431 * Blowing bubbles increasingly 'ninja loans * 1435 01:09:27,497 --> 01:09:30,200 Maybe greed only in bones * 1436 01:09:30,267 --> 01:09:32,402 Hyman Minksy never lies 1437 01:09:32,469 --> 01:09:34,571 John Cusack never lies 1438 01:09:34,638 --> 01:09:36,840 * Mr. Krugman never lies 1439 01:09:36,906 --> 01:09:38,975 Ted Crocker never lies 1440 01:09:39,042 --> 01:09:40,977 Terry Jones never lies 1441 01:09:41,044 --> 01:09:42,912 Bill and Ben never lie 1442 01:09:42,979 --> 01:09:45,215 Justin Weyers never lies 1443 01:09:45,282 --> 01:09:47,384 Chris and John never lie 1444 01:09:47,451 --> 01:09:49,953 *... never lie 1445 01:09:50,019 --> 01:09:52,055 Andre never lies 1446 01:09:52,121 --> 01:09:53,923 *... never lie 1447 01:09:53,990 --> 01:09:55,859 * Triple-A meltdown 1448 01:09:55,925 --> 01:09:58,695 * Financial instability boom hypothesis * 1449 01:10:00,530 --> 01:10:04,734 * Financial instability boom hypothesis * 1450 01:10:04,801 --> 01:10:07,304 * Financial instability boom hypothesis * 1451 01:10:08,938 --> 01:10:12,208 Submitted by: www.subtitlecinema.com