Wow, what a great informative video. It helps me study a lot, but it also makes me feel awkward because many people still blame free market despite the fact.
Free market still has a role as other non-US banks bought up these bad loans that were sold to them as good ones. Banks also fraudulently reported income to approve loans increasing their profits and risk. Also banks rallied for less regulations which they got under Greenspan.
It may not be obvious, but many macroeconomic mistakes were actually made out of sympathy and humane causes. Recent technological advances renders the majority of people useless in an economic sense. Free market would instantly drive them all to suicide. There is no cure for that. Current and previous measures therefore are based on ignoring this terrible problem and prolonging the inevitable.
Throwing in your own personal opinion that some were quitting their jobs so they could get the break in not having to repay back the loan on their home. So glad that you knew what all Americans across the country were doing during that time. People were LOSING their jobs ALL OVER the COUNTRY during that time. I know because I was laid off from my job and lost all of my investments, others around me lost their jobs and some states had problems paying unemployment payments to people because states were having problems meeting the demand of high unemployment. Stick to facts as to what actually happened instead of assuming everyone is lazy and wants free passes.
Excellent production work. Bravo. I’m in the concrete pumping industry in Southern California and I lived through that experience and let me tell you it was very ugly.
Well we are currently writing the sequel in the United States right now stay tuned. Its called credit card debt, auto loans, student loans and housing loans debt. I heard its gonna be a box office hit.
Your explanation and your examples was briliiant. I actually took 40 minutes to understand as I was repeating it to understand your accent. But it was very good . Thank you for the good work
Corrupt appraisals inflated the values of the houses, consumers rolled their car loans and credit card debit into the mortgages and the loan issuers didn't question the value of the houses. I saw this in Florida and Colorado. Additionally gasoline prices spiked right at this time also so the fools driving large SUVs were getting soaked with fuel costs. They were not able to pay for all of their expenses. Broken ARM loans were also a problem but the spike in the petroleum market was a much bigger factor than it is given credit.
This video doesn't explain why investment banks like Bear Stearns and Lehman Brothers, two of the most visible failures of the housing bubble and which were under no legal obligation at all to fund flaky mortgages, did so anyway. They were not beholden to the CRA the same way commercial banks are. The fact that they're not called out explicitly in this video for analysis is suspicious, in a "I have a specific agenda" sort of way.
Much of the housing built during the boom years was not only overpriced but also more house than you needed. We will need smaller and more affordable housing.
You completely missed the failure of the Ratings Agencies to junk the value of the resold loans which would have avoided the entire crisis. Nice fx and bgm.
Moral hazard. The ratings agencies had no culpability to the actual validity of the securities. This made their stamp of approval kinda meaningless since they had no risk and had a… police investigating themselves effect
These videos are amazing but I really wish there was a citation list in the description of all the sources. For example the "25% of houses bought for speculation" i am unable to find a source
Wow this is exactly what's happening in Australia right now. I wonder if the government is going to bail out the big four banks ? I think I know the answer.
What about surplus funds from export driven economies pouring funds into the US financial system, lowering long term interest? What about the dual mandate the federal reserve has to promote full employment and price stability (contradictory set by congress), what about the tax cuts for the wealthy? You think wealthy people spend their money or invest their money? Sure the Fed played its role, but I’d hardly put it all on them. Bubbles have occurred even before central banking.
I agree with everything stated other than your concerns with CRA , which is something that is more up for debate. When isolated, the effect of the CRA isn't as large as you would think that it was, most of the risky loans made by institutions that caused the crash were not required by the CRA, or were made by loaners not covered by the regulation's umbrella. Moreover, the default rate on CRA-backed loans weren't significantly worse than the average loan, and there wasnt much evidence that it influenced the profitability of banks. The CRA was successful in its goal of countering redlining, which included discrimination against people of color with both high incomes and low, so there was room to make good loans under the CRA requirements. It explicitly stipulated that loans made under the guidelines were to remain profitable, and that there was no obligation to take losses. If we are looking for the true culprit of the crash, it has to be the state-backed Fannie/Freddie. A private firm wouldn't securatize such risky loans, or at least there wouldnt be an assumed AAA rating.
The credit rating agencies mis-rated the securities because 1. The didn't fully understand what was in them, 2. No one thought millions of people would stop paying their mortgages all at once, ad 3. The ratings agencies had to protect their business relationships with the banks as well as their profits.
Since we Canadians thought we were so "smart" to stimulate or housing market at that time in order to create a "wealth effect" and to promote consumer spending through rising home values, we are NOW faced with a housing bubble that is worse than what the US experienced, particularly in our most bubbly cities of Vancouver and Toronto. If you'd like to find out more and/or share your own "News and views" on our situation here, feel free to join with the other 579 members who have joined my "Metro Vancouver Housing Collapse" FB site since November, 2017.
The reason people started not paying back their loans was when oil prices went to 150 per barrel and gas prices were above 4 per gal, the thinking was oh shit i have to go to work to keep my income so I will but gas and not eat out and slow my extra expenses. Now this slowed spending laid off workers and and they stopped paying their mortgages.
The USA does better than most countries. I retired in 2008. Invested 1/3 in Municipal bonds, 1/3 in an annuity invested in stocks, 1/3 IRA balanced funds. We lived well since 2008. Our net worth has increased. We are immigrants from Germany. I am glad we are here and not in Germany. I am questioning a negative view of the USA. WHY? Do you have a crystal ball?. I do like your video and subscribed but think the USA will do fine. I guess I am an optimist.
I relate this expansion of the restaurant example which became a huge cost to how we are trying to colonize Mars. It will be a huge misallocation of Earth's resources and it won't be as if it we will cut ties and allow them to fend on their own. Mars will basically be a near permanent welfare recipient. Sometimes resources should be consolidated. It's like sending a family member to the ghetto, but he can't get on his feet and you need to send your money for him to survive. He would've been better off staying close to the family in a resource-heavy location. We don't need to be a two planet species. Has our level of happiness increased as we expanded over time? No, it's all relative. All we are doing is creating increasingly difficult challenges for ourselves.
People the "community reinvestment act"was legislated in 1977. Long bow to say it was responsible. Who forced the banks to create Mortgage backed securities or SIVS? No-one? Could be lack of regulation?
Maybe they should seek back the help and assistance of those individuals/group of persons who have COMPASSIONATELY helped sincerely in the past during the 2008 crisis without any monetary gratifications or kickbacks making 2020 a way better circumstance than it was before??🤔😊
Banks made a lot of profit on bad loans because they chopped them up and sold them. More loans meant more money. Government regulations may have played a minor role and low interest rates enabled the banks, but the main culprit was the false sense of security caused by the "endless" rising housing market and credit "swaps" in which everyone promised to pay everyone else if things went bad... a daisy chain of dark derivatives that fell like dominoes.
<a href="#" class="seekto" data-time="179">2:59</a> It's not simply a 'mistake' when businesses make malinvestments under cheap credit. Businesses must start expanding to keep up with competition. In the case of the circus, the business man can survive without their business, save, & they'll be better in the long run. Their competitors can't capitalize on the profits made from the circus by investing into the business, & then beat them. They're gonna leave soon & everyone knows it. Also, people within their competitor's business, & those who trade with them, don't want to face future collapse from too much present investment. Contractual agreements ensue. In the case of cheap credit, it can last for a while & doesn't face any of these market forces. It's not a mistake. It's an inevitability.
the system is so artificial is a speculative rollercoaster. everyone is encouraged to borrow and spend. banks can just print money to lend at low interest rates. system is not going to change any time soon.
the correct solution to when the government says you need to give access to minority groups for housing loans that doesn't mean you should put people in homes they cannot afford. A bank should work to improve on affordability not pursue restrictions. #millienials
it is true that greed is the cause of great recession. u know greed people make lower interest rate regulation lure people to make stupid decision in buying home.
As for investment, usually a big technological breakthrough or a jump in the education in the labor force has ended a slump. I don't see either of these in 2018.
2007 2008 i never recovered. things are little better but its been 11 years. and now that we have trump the people that hate him cant make things better . it would mean he did what others couldn't, so we suffer some more.
So what about predatory lending? yeah the requirements may have been easier but loan officers, mortgage companies and banks all were ok with knowing these people couldn't pay the ARM rates once it runs out. Truthfully I think greed was the problem not the regulation. Mortgage banks eventually sold the loans to larger institution such as Fannie Mae and Freddie mac and washed their hands of it. I also though the bank bail out was a mistake but at the same time, the world is dependent on the US financial system. If the US didn't bailout the banks, chances are the world would regulate against US dependent. This video has a very conservative view but I think Obama's approached made it better and got as out of a recession rather than be hit with a full blown depression. I'm a conservative but I see that we needed to help those who made the mistake, unfair for those that did the right thing but overall it helped everyone.
Have you asked any minorities with barely any understanding of English that managed to get a mortgage? Ask them what happened. Ask them how they thought they can pay for their salary with minimum wage salary? Ask them how some were able to obtain a mortgage with no legal status in the US. Trust me, there were a lot of these scenarios. I'm not saying predatory lending is a leading factor, just a contributing factor. The mortgage sector was making boat loads of money and knew there was something wrong with it. So, do you think they're going to the government to tell them to regulate it?
I settled this 2 months ago. Can't bail out stupid people for their mistakes. Recessions are ok when the system needs a reset, all Obama did was pay off a credit card with another credit card. The bill will come do.
So you're saying the banks are stupid or the people getting the loans are stupid? Keep in mind banks we're literally going bankrupt left and right. If banks were smart then wouldn't have lent money to subprime people.
Nez Ram Yeah, you sound like a dull witted black American, but I know you aren't. Someone else is the problem, yes? In your case, it's the "jews." Pathetic.
There is an important omission in the video. The lack of regulation of credit default swaps (CDS) greatly contributed to the world wide financial melt down. CDSs are insurance contracts, but regulations that are placed on insurance companies (such as assets to back up policies) were forbidden by law to apply to CDSs. This is one case where the free market is to blame, and not government regulation. To add insult to injury, the government bailed out owners of CDSs at 100% of face value when sellers of the contracts were unable to redeem them.
Trump's corporate tax cuts will be influential in predicting corporate survival in the next coming slump. If the cuts are used well, the company will survive. If not - bye bye bye!
I think you have mis represented the role of CRA and regulation. The banks brought in great and unchecked risk into the market and the economy and tax payers paid for it. Why were these externalities not taken into account in building these products and making these trades? The banks and the “free market” played a major role in destabilising the US economy and the global economy. But they have not paid for it as yet.
Austrian school is dead. Productivity gain and markets no longer have connections. (Robotization, globalization) Property price is rather linked to proper age structure of the society. If there is a country that is full with retired people, property market is shitty without speculation. If you take any country with huge young population property appreciate without productivity growth.
I belive, In Jesus, Honesty, Planning, Wiseness, Innovation, Hard work, Care, Love, Studying, Freedom, Free speech. Capitalism is the small part of the story
Yet, he still show the way that we should take care of each other. The "economy" is a result of our actions, as a society. We came first, not the "economy" . Should it be the opposite? We serve the "economy"?
Nice video. There's just one tiny little detail you forgot to mention, namely that all of this is the result of RIGHT WING politics, for the simple reason that right wingers couldn't deliver on their promise of "trickle down economics", because that's something that has never worked and never will. Whether it's in the US where Trump and Clinton are BOTH right wingers www.politicalcompass.org/uselection2016 or in Europe, where ALL governments of ALL countries are right wingers www.politicalcompass.org/euchart almost ALL politics almost EVERYWHERE in the world is trying to enrich the rich even further while desparately searching for ways to keep average people calm. In the US about 80% of all people have discovered by now, the American dream has become unreachable for average people and the ONLY thing right wing authoritarians could think of, how to prevent the bottom 80% from launching civil war was to give everyone an own house, even if they couldn't afford it. So for about half of your argument I agree, it's authoritarian government that causes all these problems, but I really feel the need of pointing out that this is exclusively RIGHT WING authoritarians. Therefore the solution is in libertarians, but it has to be LEFT libertarians. There even is an example for a left libertarian government that works perfectly, where the whole world knows how great it works: Switzerland. What you might not know is, how Switzerland achieves this, which is a completely powerless government, because absolutely ALL decisions are made in referendums, where the general public makes ALL decisions and politicans are there for nothing more than executing the will of the people without ANY power of alternating or interpreting this will of the people.
There's just one little problem in your attempt to bash left politics, which is, there is no left politics, there hasn't been any in the last 20+ years, nowhere in the world. Whether it's in the US, where democrats, republicans and libertarians are all right wingers: www.politicalcompass.org/uselection2016 Whether it's in Europe, where literally ALL governments are right wingers: www.politicalcompass.org/euchart Whether is individual countries, like France, where even the parties that literally call themselves "socialists" are in fact right wingers: www.politicalcompass.org/france2017 absolutely EVERYTHING that has gone wrong in politics in the last 20+ years is EXCLUSIVELY the result of right wing politics. If you wanna contest that, by pointing to political parties that define themselves as left, at least try using your brain for a few seconds. Absolutely wordwide, literally EVERYWHERE, even including China and Russia, also including countries like Greece, where a real left party won the election and got turned into right wing politics within days after the election, do the EXACT same politics, out of which the rich get richer and the poor get nowhere. Tax cuts after more tax cuts for the rich, cuts in social services for the poor, how could that possibly be anything remotely conected to left politics? Ahhh ..... hold on ..... as already mentioned above, there is a left wing country and I believe THAT is why it has been about the ONLY country in the world that never had any major crisis throughout it's entire history and that's still Switzerland.
Curious, IFFFF the US is an unsustainable welfare state, while it doesn't even have health care for everyone as a basic human right, doesn't even have a social security minimum paid by the state in case anyone has no income, doesn't even have 10 days of paid vacation per year (other than xmas holidays), how come Switzerland can afford to - have an effective (without even needing a law about it) minimum wage of $25 an hour - have guaranteed health insurance for EVERYBODY, including poor people for free - have near not existing unemployment - have SEVEN WEEKS of paid vacation a year as a law for ALL workers - have parental leave for mother AND father for up to THREE YEARS in case they have a baby - and so on and so on and so on, the list is endless All of that easily afforded, continually over HUNDREDS OF YEARS without EVER getting into a serious crisis, even as a neighbor to Nazi Germany during WWII not getting into any trouble, in a country that is considered one of the richest per capita in the world. How can that be, unless your right wing ideas are complete nonsense? Compare these two and then tell me, IFFFF the US is left wing, then what is Switzerland? Actually I can give you one tiny example of how the Swiss accomplish this. Switzerland makes ALL political decisions by referendums, politicians themselves have no power whatsoever, they are plain representatively executing the will of the people, which on first view takes all corruption out of politics, because there is no point in bribing someone who has no power of making decisions. Switzerland has a publically owned and financed set of TV and radio stations, where ALL citizens have to pay a given fee per year to pay for that. Recently right wing movements tried to hold a referendum about abolishing this mandantory fee, arguing the typical right wing way of free market and junk like that. The Swiss have with a 2/3 majority voted to keep the fee, because the Swiss have understood that if you leave the media exclusively to privately financed media corporations who run right wing propaganda, that's the end of objective journalism.
incredibly biased take. if you are going to put your own political opinions into an "educational video" make sure to say it in the title. this was 50% facts and 50% your opinion about the economy, label it that way
This is only ideological insomuch that he is viewing the issue through an Austrian lens. And that really only has to do with the prescription, the causes are pretty hard to disagree with. Keynsian - Predatory lending did this because there was no regulation to stop it Austrian - The government incentivized banks to implement predator lending practices, so they did. Regulation was not needed on this issue before because the banks regulated themselves; it was their money. The problem is still the same... just different sides of the same coin.
Here is an actual 700 page report commissioned by the United States and done by a number of economic professionals that I've read on the topic of the Financial Crisis. www.gpo.gov/fdsys/pkg/GPO-FCIC/pdf/GPO-FCIC.pdf I've also read number of counter-arguments to Peter Wallison's dissent on the issue. The report underlines that the primary causes of the crisis were irresponsible private sector actors, a breakdown in regulatory agencies and officials, and a failure of accountability and ethics. Was the Government faultless? Of course not. However, painting this crisis as a result of excessive regulations and an invasive Gov. is not only disingenuous, its lazy. Which is understandable considering this video is meant to be an ideological justification rather than an honest attempt to explain the crisis, which would take many more minutes than 20.
