The Global Financial Crisis of 2008 - The Primary Causes

uh the introduction M to mention that I have been teaching for one also in Taiwan and I have made three courses three months I have worked and taught also in maau as a guest uh lecturer and uh my topic for today is the 2008 Global financial crisis the world went into a major economic crisis they call it the Great Recession uh millions or tens of millions of people lost their jobs thousands of businesses went bankrupt a lot of financial institutions went bankrupt a lot of homeowners lost their houses so it was a major economic event

known as the Great Recession which is supposedly the second worst recession over the last 100 years it is still ongoing on and lingers today and I may actually discuss that we are now preparing the world for another even major even worse recession coming down the road but I hope I'll be able to explain why my focus for today is for the causes what really caused the depression or the recession of 2008 the main reason is that media tells us stories which are false which are not true we call this propaganda propaganda tells us what the

governments want us to hear I'll tell you basic economics hopefully that first and second year students are able to understand so my focus is on the alternative causes and a short overview of what I'll do today is give you some background information I did a little bit tell you about the root causes which are very easy to understand and then we need to look at the fundamental causes later on we discuss the topic of who is to blame whose fault it is someone is at fault they tell us oh it's the free market that failed

for example or it's greed in Greedy Bankers well we've had free markets for a long time we've had greedy Bankers ever since the introduction of banking for thousands of years Bankers are greedy greed does not cause economic crisis and a little bit of of is there another Crisis coming now and then a short conclusion I hope to spend about 50 or so minutes in about 20 slides and then uh give you the chance for some questions maybe you have some questions important possibly we can also interrupt Midway through okay so what's the background the background

is actually very simple during the '90s and the late '90s I guess about the time you were born uh there was a major.com telecom bubble this was the bubble of the internet it was the bubble of communications that's when the internet became popularized that's when everyone got online you had many companies and those companies grew fast and they grew fast with a lot of debt everyone was investing in internet companies everyone was investing in software everyone was investing in telecommunications company it was a huge boom that grew into a major bubble a bubble simply means

that the sector is much much larger than the economy needs and a bubble means that eventually when it burn it becomes a major crisis it has the power to collapse the whole economy to collapse the banking system to collapse most of the economy to the point where most people would lose their jobs so as the bubble burst the US government made the decision instead of taking the consequences to Institute a policy that will mitigate meaning make the problem easier by creating a much bigger much worse problem so as the bubble burst the recession of 2001

and 2002 came it was supposed to be a horrible recession but the US government intervened by printing a lot of money we call this easy monetary policy it happens by lowering interest rates extremely low everybody borrows in other words the economy runs on borrowing in debt and the biggest borrower was the US government so the government borrowed consumers borrowed businesses in corporation borrowed everybody borrowed and everyone was getting in debt fast so that's the FED response lower interest rate and the result was the lowest interest rates in US history now even later I'm making a

interjection is we have the lowest interest rates of recorded history over the last 2,000 years we have the lowest interest rates in recorded history this we are told is something good but the reality is that this has terrible consequences so the result was massive borrowing and massive real estate bubble everyone was borrowing money everyone was investing in real estate the US economy built a giant real estate bubble and so did Europe almost every year European country had a giant real estate bubble and so did most of Asia except for Japan uh Hong Kong a huge

bubble Singapore a huge bubble Thailand big bubble pretty much most of the world grew a major real estate bubble out of the ultra low interest rates in the United States and therefore low interest rates all over the world so the result of that was the global financial crisis of8 that's the short background information which I could possibly produce within 5 minutes so what our media and politicians tell us they tell us that it was caused by greed but wait a minute people today now are greedy people yesterday were greedy a year ago people were greedy

10 years ago people were greedy 50 100 200 300 years ago people are always greedy greed is part of human nature greed makes people do things yes but it's not greed that drives economic and financial crisis people always want to have a house always every culture every civilization British people say that my house is my castle bulgarians are crazy about real estate Russians are crazy about real estate Americans are crazy about real estate of course singaporeans in Hong Kong and Thai people are CR everyone wants a house it's not greed that makes the bubble it's

credit second they say it's caused by the failure a free market well that's also patently false we've had in history before a lot of free markets and definitely free markets don't cause bubbles again it's the same fundamental understanding bubbles are caused by borrowing in debt somebody allows the policy of of borrowing and debt free markets just don't cause bubbles okay that's you need to understand otherwise you get be in a bubble almost all the time okay it's caused by market failure somehow we're being taught that the market failed to regulate or the market failed to

self regulate that's also and I'll explain a little later why well just markets didn't fail something else failed and that's something else of course is monetary policy fiscal policy government regulations that failed again that's part three that's what I'm going to be explaining caus by human psychology but as I explained also in part one people psychology is always driven to prefer houses human psychology doesn't make bubbles human psychology doesn't make Banks to collapse it's something else it's an easy explanation but it's not truthful okay you have to make a difference between what what is easy

to tell the people and what is actually true and finally we're told that it's caused by Banks and the answer is yes it is true the banks contributed they were a major participant but it's not simply the banks themselves yes they have a role they have a part okay but they're not the main contributors they're not the main cause they're not the primary cause so what usually causes bubbles we study in economics in financial economics there's a subject and the more you study bubbles throughout history we got recorded bubbles even for 2,000 years it's not

a new phenomenon it's basically very simple it's credit expansion credit expansion means that Banks provide more credit than the economy needs a different way of saying is that Banks provide credit at the faster rate than the economy the economy grows at 15% but Banks grow credit at let's sorry the economy grows at 5% and Banks grow credit at 15% % or let's take the example today of China China or Chinese economy supposedly grows at 10% but Banks grow credit at 20% the result is the economy grows slowly and the banking and the credit system grows

fast at one point the banking Financial system becomes too big in the economy too small that's how you get bubble so that's the first part the first part is credit and the second part is called Financial speculation people borrow to buy real estate and that drives prices so Financial speculation is you buy something to profit you buy something with the expectation that the price will rise as a result of course as people buy prices do rise and as prices rise people decide and borrow even more money I see this every day now in Thailand and

maybe you see this here in Korea too as housing prices go higher and higher people have to borrow more to buy and as they borrow more to buy they buy they speculate it goes to higher prices and again higher prices more borrowing higher prices more borrowing higher prices this is a vicious circle and this is the bubble as long as the credit Flows In other words as long as people can and borrow you will get the bubble so this is the basics of bubble it's actually amazingly simple but it is very seductive politicians love it

and bankers love it Bankers make a lot of money while they are landing people feel good it's like a drinking party everybody's having good alcohol everybody's having a good time the problem is when it's over it feels bad it feels terrible so that's the background we use the words credit is the same as debt is the same as leverage the economic explanation is very simple you could use credit productively or you can use use credit nonproductively productive credit makes phones and shirts and computers and cameras makes real things for consumption rice food okay and nonproductive

credit is credit used for consumption nonproductive credit or consumption credit is you borrow money to buy a car you borrow money to buy a house you borrow money to buy a telephone consumption credit would even be considered you borrow money to study you borrow money to go on vacation so all of this is consumption credit you have to understand that consumption credit is not productive and the other nonproductive credit is speculative credit this is credit you borrow money and you invest in gold hoping the price of gold to go up and you make a profit

you borrow money and you invest in stocks hoping stocks go up and make profit or you borrow money invest in a house hoping that the house real estate prices will go up this is speculative credit so when you see the banking system provide credit the question is do you provide the credit for productive purposes build ships build cars or for consumption purposes okay actually buy the car there's a big difference whether the lending is for the consumer to buy the car or for the manufacturer to build a car if this share is relatively large if

the nonproductive credit share is large you are doomed to a major economic crisis if the share is mostly for productive credit you will mostly have a good healthy economic growth a different way of saying is that that productive credit grows healthy economy and nonproductive credit grows a sick economy a lot of nonproductive credit makes the economy sick so what were then the real causes real causes are very simple the Central Bank in the United States the Federal Reserve and other central banks around the world kept interest rates extreme low ultra low they kept interest rates

at 25 quter of a perc normal interest rates will be 5 to 8% so they kept interest rates 10 times lower 20 times lower than normal when you keep interest rates 20 times lower interest rate is the cost of money interest rate is low interest rate means money is cheap a lot of people will borrow if if the cost is 10 times more sorry lower people will be borrowing a lot and use it for consumption speculation and everything else so that's very simple and the second part is that the lower interest rates actually fueled nonproductive

credit that's where the problem is a nonproductive credit eventually becomes bad credit bad credit simply means that the borrower can't pay the borrower borrowed too much and can't pay back so people in the United States they borrowed for a house in 2005 2006 2007 and by 2008 or 9 2 three 4 years later they can't pay anymore when borrowers can't pay the bank is in trouble the bank goes bankrupt so the real causes are the low interest rates most of it it flowing to real estate and fuel the real estate bubble so this is the

heart and most of the time where I'm going to spend today to explain some of the real causes some of the fundamental causes what's the driver what's really causing things and I'm going to spend the next maybe 30 minutes or so that's most of my lecture today to explain these nine or 10 causes like reach for yield what does it mean to reach for yield and how reach for yield caus the problem we'll explain what's a yield what is subprime lending and what is it coming from what is financial Engineering in securitization this is some

Advanced finance and I'll try to explain in simple terms so that you can understand what is the maturity mismatch again this is some difficult stuff I'll try to do my best minority lending is easy to understand housing policy is easy to understand credit ratings are relatively easier to understand Credit Insurance is a little bit more difficult bailout policy is easy to understand and finally non-punishment is very very easy to understand so a lot of this is easy Common Sense stuff some is a little bit trick here so three and then I'm go 31 32 33

and so forth all right reach for yield yield means return return on an investment when you put your money in the bank your return which we call interest is also called yield yield is what you get on your Capital what you get on your money what you get from your stocks or from your bonds or from from your real estate or from your bank deposit and when the Central Bank makes interest rate half% you don't like half% I don't like half% nobody in the world wants half perc they want three they want five they want

seven so what they will do is they will try to make some other investment hoping to make 3 5 7 or 15 or more perc so reach for yield basically means that people don't like the government giving you half% and trying to do other things you're going to buy stocks if they pay you 10% you're going to buy real estate you're going to give you 10% you're going to buy gold you're going to buy whatever you think will give you 5 10 or more perc but you're not going to take the government so the reach

for yield is clearly caused by the Central Bank and kill caused by the Central Bank policy of low interest rates they were half a per and at one point 25% 0.25 extremely low like nothing so what is the reach for yields do Central Bank tells you oh you got to do other things well number one you start taking more risk you invest in Risky stocks you invest in Risky bonds you invest in Risky businesses you invest in Risky financial instruments right derivatives you invest in Risky possibly gold you invest in whatever risky thing will give

you will give you more profit more return more yield well it was known back then as the age of risk so the low interest rates made every everybody take all sorts of risks okay so it was time to make risky Investments and part of taking risk is speculation speculation don't really need the second house and the third house but you buy the third house because you think the price is going to go up and you're going to be able to sell it at a profit that's speculation so speculation is purchasing an asset usually with borrow

money because of expectation that the price will go up and you're going to make a profit meaning a higher yield or a higher return it also caused Financial engineering Financial engineering is bankers and financiers design new instruments new ways to sell to investors to sell to Pension funds to sell to Future funds to sell to anybody and these have fancy names uh uh if the uh Auditorium was mostly professors in businesses I can teach this is asset backed Securities these are mortgage back Securities these are credit default swaps these are complicated stuff but the essence

is very simple because you can get on your bond only half a percent which is like nothing Bankers try to design new instruments which will provide investors with better returns okay and they started selling them to funds Pension funds investment funds insurance companies to anybody who would buy them the reach for yield also caused subprime lending Prime means high quality good quality subprime means below good quality means poor credit subprime is somebody who doesn't have a good credit who might pay who might not pay in other words subprime means risky means high risk and subprime

lending basically is highrisk lending in other words you run out of good borrowers and now you make loans to bad borrowers usually subprime is associated with bad borrowers make bad loans next one is called maturity mismatch that's finance and investing term it's a little tricky but it's actually very simple you borrow a loan for let's say 3 months or 6 months and you invested for 5 years or for 10 years you borrow short term and let's say you borrow for 6 months you buy a house after 6 months you borrow borrow again for 6 months

and then you borrow again so you keep borrowing and borrowing and borrowing every 6 months and you borrow while you can if you can't borrow you go bankrupt this is maturity mismatch is caused by the fact that you can borrow shortterm very cheap because that's what the low interest rate and then you invest in longterm which gives gives you more return okay so here is something very simple to understand just a low interest rate policy will cause four or five other things to happen Each of which is potentially bad in each of which will potentially

lead to the global financial crisis okay caused by or driven by Central Bank by the American government essentially all right number two that's the risk-taking part so risk-taking part simply means you take risk means risk is higher well higher risk when you invest in something that is riskier it will give you a higher return if it's low risk it's 1% but if it's high risk is going to be 10% or hopefully 20% but high risk means you may get the 10% you may not get the 10% you're not sure it's risky okay the government gives

you 1% for sure but that's not good enough okay so you take more risk hoping more risk for more return I already explained the low interest rate by the government created for five years the age of risk when Bankers talk between themselves and it's even in the media it's everywhere if you watch from 10 years ago people say risk risk risk you got to take risk the only way to make profit is to take risk every was about risk everyone was taking risk everyone understood that the only way to make money was to take risk

it created it's called a culture of risk everyone was thinking about risk and everybody was thinking that you got to take more risk to make more profits part of the risk was of course subprime lending and subprime lending I'll explain comes in a number of different forms one of them is just somebody's got a good job but got sick or whatever the problem was he can't pay he's a higher risk or some somebody already has a house loan has a medical loan has a car loan has a few other loans he's already deep in debt

but you give him one more loan maybe to buy a telephone maybe to buy a laptop back in the old days laptops were expensive people will borrow a good amount of money to buy a laptop okay so subprime lending was more profitable in businesses Bankers everyone is driven by profit if you're a bank and want to make more profit you will be lending to a lot of bad borrowers hoping they will repay also the government's interest rate of 25% this is one qu of 1% it's like free it's like free money Bankers saw the money

as free and when they were getting the free money they did all sorts of crazy thing with it they'd lend to anybody anybody who wanted to loan for any kind of stupid stuff they just borrow the money cuz the bankers were getting it free so the more you lend the more you make profit and again one of the other problems the bankers took the money when they made a loan they take the profit right away they take a commission right away and they leave the risk to the depositors and to the bond holders and to

the stockholders so the banker takes his little share called Commission of the loan right away the banker profits immediately and if something goes bad three or 10 years down the RO they don't worry that far away so risk taking usually means more risk eventually means more bad loans eventually bad loans means Bank can't get back their money and eventually they are in trouble means a credit crisis and a credit crisis economic credit crisis means crisis in the financial system crisis in Banks Banks don't have money well when Banks don't have money suddenly the whole economy

is in trouble means an economic crisis number three Financial engineering well you can't make a good money on bonds they started to securitize securitize is fairly complicated you get a bunch of different bonds or loans or Securities or mortgages you package them all together and you either sell them as one package or you slice them in small pieces and sell them as a piece in other words you take cheese tomato and everything you make it like one giant pizza and then you cut a little slice and you take one slice you take two slices you

take one slice you take three slices depending how much money you have or how much you want to eat well that's what securitization it takes a bunch of different financial instruments you puts them all together and then slices them like a pizza and everybody takes as many slices as they like that's securitization and they created credit derivatives these are financial instruments which bet on credit what does it mean bet bet is the same as take a risk is the same as gamble it became like a Cino and one of the problem is that now you're

getting a big giant pizza with all sorts of stuff you don't know what's inside you don't know how much is healthy how much is not healthy how much is good and how much is junk okay so suddenly you get you may get into problem so this securitization idea where I take a whole bunch of loans you package them together slice them and I give you one piece and you one piece and everybody a piece or two or three as much as you can means that this these risky loans suddenly you begin to transfer I give

you a little pit piece of the risk for you and a little for you one for you one for you one for you everybody gets a little bit of the risk this is called risk transfer now I'm the bank I don't hold a big risk all of you hold a little bit of risk so we are spreading the risk well it's the same thing with the pizza if inside the pizza there is a poison something that if you eat it will kill you you if I put it on a whole bunch of pizza and you

get a little bit of that poison suddenly you're going to get sick or poisoned you're going to get sick or poisoned in other words now you spread the risk but when the risk blows up you now you spread the crisis the crisis in America is now in Norway because Norway invested in them now the crisis is in Germany German funds invested in those American Security is in England because the British invested in them so suddenly the crisis is spread all around the world and then it also spreads uncertainty you don't know where the problem is

you bought one security like you bought a slice of pizza but you don't know is it a tomato is it the bread is it the cheese you don't know which piece is poisonous here you bought one security which is made out of 100 different different Securities you don't know which is the bad security suddenly you got a bigger problem you got a investment and you don't know how good it is you don't know how bad it is we call this uncertainty and the risk transfer actually encourages more risk taking in a different sense oh I'm

the investment Bank I'm the banker I made all of these housing loans more mortgage loans now I take the loans I package them together and I distribute them to each one of you now I don't have any more loans I can make more loans again package them and I'll send them to these guys when I sell them again I can take more mortgages and I'll sell them to these guys so what the Wall Street securitization machine did was actually make more loans package more Securities sell them to the bunch of Japanese take more loans package

them sell them to the Chinese maybe they'll sold a bunch to the Koreans too you know the whole world was buying them so securitization and credit derivatives allowed risk to be spread throughout the world and when the crisis hit to hit almost the whole world number four maturity mismatch maturity means how soon you have to pay maturity mismatch means you borrow short is in short term you borrow only for 3 months or borrow for 6 months or borrow for one year and then you invest longterm so you borrow money for one year from the bank

and you buy a house but of course the house you cannot pay in after one year you got to borrow after one year again and then after one year again because you borrow can you can borrow cheap short term so you borrow short term and then you invest longterm the return on long-term instruments is high maybe five maybe 7% you borrow short maybe half% maybe 1% so think about it you borrow by 1% you invest in 6% you pocket a difference of 5% that's a huge return from 1 to six five return so you capture

that profit and it provides incentive for everybody to borrow short everybody borrows short meaning three months and after three months you got to borrow again and borrow again we call this refinancing if you can borrow again you're okay if you can't borrow again you go bankrupt we call this interest rate risk if interest rates rise you got to borrow again at 1% at 1% but what if you have to borrow at 5% well you borrow at 5% if you're getting four you're losing money if you got a borrow at 10% and you're getting five you're

losing money so this Works only when interest rates are low so here's another simple explanation they created a system during low interest rates that works only when interest rates are low if interest rates rise the system collapses the whole system breaks down so it requires continuous refinancing it also requires every 3 months you borrow again you borrow again this ability to borrow is called liquidity so liquidity is also required so it requires that at every point in time you're able to borrow when you need so now you need two things you need interest rates to

stay low as long as interest rates stay low you're okay and you need liquidity meaning ability to borrow whenever you need now the system becomes vulnerable if credit stops most of the system collapses or if interest rates rise most of the system collapses again that's number four number five minority Landing minority Landing you probably don't have this here in Korea it's probably not available in China but in America you got African-Americans these are people with with black skin they're called minority you got Latinos these are Mexicans or other people from Latin America which are a

small percentage of the people you may have immigrants in other words these are people of other race okay of other culture and you have to you know the government says oh we lend to blacks oh we're helping poor people oh this is good for the community these are only nice things to say oh it's required by government policy the government forces the bank whether like or not oh there's a black person you got to lend to that black person doesn't matter that he is fat that he's sick and that he doesn't have a job you

got to land to black people so that's basically a government policy okay and for the lenders they say it's okay we'll lend to that people going to securitize it and going to you know sell it to the the Chinese so again that Minority lending encouraged a lot of bad lending a lot of bad loans and of course the US government like most governments in the world has a housing policy the government encourages houses it's a nice if you have a family to have a house right of course it's a nice well just it's nice to

have a BMW right it's a nice to have a nice phone right it's nice to have things but government made it policy and Bush literally said it's a good thing but we got to differentiate with what is good and what is healthy for the economy in other words what is good for the people may not be good for the government or for the bank and so on so government provided government guarantees okay we're going to encourage housing the government will guarantee certain loans to minority to poor people the government provided even lower interest rates to

borrow and invest in houses again encouraging more lending more housing more borrowing and the government reduced down payments you don't need to pay as much you don't have to pay anything and you can get a brand new house okay hopefully you're going to be able to pay so it finances risky borrowers and bad debt next one was credit rating agencies and what the credit rating agency was the following you got the pizza slice and the credit rating agency comes from the government says your slice is healthy you can eat it and then it puts a

stamp your slice is healthy you can eat it so what the government credit rating agency do is they stamp approval they stamp how good the credit is well there's a problem with credit rating agency the problem is that they are protected by the government there are only three of them in America and only three the government has authorized and licensed and here's the best part no matter how bad your policy is no matter how bad your stamp is no matter how terrible you perform you're one of the three you guaranteed by the government that no

matter how terrible you are you're always going to make profits so they didn't care they were collecting fees and they were making a stamp of approval okay and there was on one other problem the bankers paid to the credit rating agency in other words the credit rating agency was getting money for good grades this is exactly the same as if students paid the teacher for the grade if every student paid money directly to the teacher for the grade your grade will be only a because you're not going to pay money for any other grade so

the system was protected and distorted by the government and the system was corrupt at the core it was a badly designed system that was designed by required by and protected by the government you had a a lot of other private agencies that could not compete because they the government did not allow their credit ratings so that was the government number eight Credit Insurance there were a lot of banks there were a lot of insurance companies that insured those credit ratings in other words one you got a slice of pizza one guy says your pizza is

healthy but another business another bank says in case you get poisoned or stomach ache I will pay your hospital bill I will you know you're not going to get poisoned says the first guy the second guy says if you get poisoned I'll cover uh your medical bill and I'll compensate you okay so that's Credit Insurance Credit Insurance means you make a loan if the loan is bad we'll pay for the loan will cover your losses well Insurance we've had in Europe for 2,000 years insurance insurance requires Capital if you want to insure you need to

have money it requires Capital well they were not regulated the bankers themselves those who made that insurance rejected the regulation they didn't like the regulation they didn't want to have the capital and they put a pressure politically on the central bank they put a pressure pressure on Regulators they put a pressure on legislators and the US government meaning the Congress decided not to require capital and not to regulate them so it was a big giant party I can you know Ure anything and I don't need any money or Capital to do the insurance that's number

eight and number nine bailout policy bailout means if you get in trouble the government will save you uh if the big bank is about to collapse and they going to be huge losses the government will give money to the bank and save it well the government had a bailout policy where if a bank is too big to fail in other words if it's going to cause economic problems for the whole country meaning a systemic risk the government will save the bank the government will bail it out well if you're a big bank and you know

that no matter how terrible you are if you get in trouble the government's going to save you it just encourages more risk-taking if you're a big Bank you don't care you know the government will save you so it encourages carelessness and next it encourages unhealthy growth the economy grows because the bank provides credit but these credits are no good you know people just buy houses they're not productive credits so it actually encourages unhealthy growth in other words the economy grows bigger and fatter and sicker and it's only a matter of time before we get a

heart attack and encourages riskless rending and mergers and number 10 it's not a cause upfront but it was well known it is now called in English too big to jail too big to jail is a big boss big Banker he's powerful he's influential he may be a criminal you can't get him in jail he's not going to be punished so it's 2015 now 7 years later we know for sure now back then in 2008 we didn't know but now we know 7 years later nobody was prosecuted for real I mean they made some investigations nobody

went to jail no clawback clawback means hey you ran this Bank the bank went bankrupt give the money back give your bonuses give your salary they didn't take money from the bankers so Bankers know I'm not going to lose any money I can go bankrupt the whole Bank I'm not going to go in jail even if I make fraud okay I could be a criminal it's okay I know I'm not going to get in trouble because I'm big I'm powerful okay I'm well connected I'm rich I'm Mega rich I can I'm a billionaire I can

buy the whole Court okay so the criminals are basically Above the Law And basically Bankers saying finance that crime pay it pays it's profitable for a crime so in summary these are 10 fundamental reasons that drove more credit that drove the economy so for these 10 reasons simple question is who's responsible whose fault it is number one R for yield it's monetary policy this is the policy by the Federal Reserve in other words by the US government monetary policy number two risk-taking is also driven and caused by monetary policy in other words by the US

government number three Financial engineering it was done by the bankers but it was driven by or caused by the government the maturity mismatch again same thing minority lending that was government policy and housing policy was again a government policy credit rating agencies were protected by the government although investors had a role investors should have known not to trust these credit rating agencies they should have been smart enough they were not enough smart but the cause was by the government the credit Insurance again the same thing the government refused to regulate them the government refused to

require credit to require Capital bailout policy of course was a government uh policy that was established in 1997 and even before 98 and even before that and the non- enforcement is clearly a government failure of the legal system uh and of course political culture and so on so if you look on the right for who's responsible it is fairly clear where the respons ibility is who's to blame of course Bankers have a little bit of a role here of course investors have a little bit of a role in other words everyone participates into this whole

thing but someone sits behind it well what about the next Crisis well right now Europe is in a major crisis Greece has gone four times into crisis the Greek problems haven't been solved Italy is in a major crisis France is in a major crisis still Portugal and Ireland haven't gotten out of the crisis so most of Europe is in serious crisis the US has reinflated and now's got another housing bubble which is basically bursting the United States has blown a student loan bubble which is almost the size of the housing bubble before the US has

now blown auto loans in other words before people were borrowing to buy houses now people are borrowing to study in college and people are borrowing to buy cars and of course corporations are borrowing a lot of money this is the fastest the highest borrowing in the history of the United States and when the corporations B borrow the money they use the money to buy back their stock it's called corporate buyback well now over the last few months Australia is getting a little bit in a crisis because Australia provides China with resources and Canada provides China

with resources and the Chinese economy itself is slowing down so the Chinese economy begins to hit suppliers of the Chinese like Canada Australia Indonesia Malaysia I read just recently that the that Korean exports of consumer goods like phones and staff to China have dropped 20% in the last year so this will eventually hit the Korean economy too you can't just take a 20% hit in Korean exports to China and not affect the economy it will eventually and of course you got a the it's called The Bricks crisis you got a major major major crisis right

now going on in Russia it's much worse in Brazil today today over the last few months the Brazilian economy is in free fall it's literally collapsing South Africa is in terrible trouble turkey is already you got the stock market collaps and the bond market collaps the currency collapse uh the government pretty much collaps the whole country is almost in a revolution State Indonesian economy is in bad shape again the stock market has collapsed the currency has collapsed oh okay I just said about I forgot to mention Malaysia is already in serious trouble again it hasn't

completely collapsed but you can see the economy going down down and down Indonesia again I'm repeating the Thai economy is fairly vulnerable so as you are seeing today now meaning the 2015 a big chunks of the world economies are going steadily down okay and it's just a matter of which one leads and which one follows so what's the conclusion another minute or two well we are having now the lowest interest rates in history we have in Europe well over 2,000 years of recorded interest rate history and we have a good indication of the 5,000 year

history of interest rates today now we know that interest rates are lowest for our five ,000 year of History debt is going everywhere Up Up and Up accelerating means that debt is growing much faster than the economies including Japan and China and Australia and you name a country it's Deb is growing a lot faster meaning preparing for the next Crisis governments so far have not fixed the problem the policies known as extend and pretend whatever the problem is they just make sure that it doesn't if you got a big red spot here just put a

makeup you don't cure the disease you just put a little white cream and whatever and it doesn't look bad okay uh we also say that when you cut yourself deep they put a little Band-Aid okay but it's not a solution the government did not address the problem of debt the government did not red reduce the borrowing all the causes that were there are here present now we say the government did not make any structural no real changes were made and none of the causes that caused the previous crisis has been removed another way of saying

all the causes that you saw they are operational now today okay and you got bubbles everywhere Thailand is a crazy bubble I've been living there for two years I lived for four or five months in maau maau is a crazy real estate bble you cannot imagine all the malls and all the Rolex watches they have like it's a tiny little country 400 shops selling Rolex watches in maau and we already have right now crisis in over 10 countries so the overall conclusion that I would make based on studying this field over 10 years is that

we have a new Global Financial and economic crisis partly on the way and coming soon oh thank you