The Financial Crisis of 2008
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The Financial Crisis of 2008 was an economic bubble that reached its limits and exploded. A bubble is simply where prices continue to rise beyond the true value. People buy, simply because they believe everybody else is going to buy. A bubble is based on speculation, expectation and ignorance. When these three elements collide it creates a crisis, which is often defined by irrational financial exuberance. The causes of the economic crisis of 2008 are related to the Bush administration's attempt to finance the war in Iraq with, basically, inflation. The Federal Reserve cooperated by financing the Iraqi war, by essentially lending money to the American state. But printing new money out of thin air, actually devalues the national currency, this is called inflation. This cheap money went straight into the economy, particularly the residential housing market. As a consequence the demand for houses rose; and housing prices took off like a rocket in 2001. Thanks to inflation the prices further accelerated in 2004. More and more people took on mortgages based on cheap currency. The lenders then sold the mortgages as bundles to secondary investors, such as American banks. The American banks then sold their bundles to banks in other countries. This is how American debt spread around the world and became a real international financial crisis. European banks were selling and buying American mortgage as bundles. And all the while all of this was based on cheap money, with no value whatsoever behind it. People expected housig prices to continue to rise, but the opposite happened. The steady decline began in 2005 and by 2007 the panic kicked in and house prices were crashing down. The collapse of the housing bubble dragged the secondary investors along with it. US debt had spread all around the world and the damage was truly on a global scale.
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The Influence of Macroeconomics Policy to Indonesia Banking Sector Performance
Seflizon Seflizon Abstract
The Indonesia monetary crisis in mid 1997 was the background of
this research. The objective of this research is to identify the
influence of macroeconomics policy to end the monetary crisis and
restructuring credibility of banking institution. This research uses
testing hypotheses on nonparametric statistics. The data analysis used
macroeconomics policy in fiscal, monetary, balance of payment, and
influence toward controlling of monetary crisis on foreign exchange and
credibility banking institution as indicator of bank performance. The
data was devided into two periods, 1997-2001 and post crisis period
2002-2006. The result showed that: monetary crisis does not always refer
to foreign exchange is not significant. It is true that monetary crisis
is banking institution crisis in all aspect whether management and
financial, and banking indicator showed better performance significantly
compared to post crisis and long crisis. Keywords macroeconomics; manetary; banking
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If any other nation had sold toxic debt to America they would have been labeled state terrorists and invaded.
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It was government policies that in part caused this.
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Better than 2008 news
And 10 times better than today's news -
Can anyone suggest me a book or article for further reading?
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Excellent!
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This is the first time I am hearing about FED lowering the interest rate due to war in Iraq. Most of the times (I am studying finances) the reasons stated for la ow-interest rate is a prevention of recession after the burst of dot.com bubble, which is the common sollution. Can you support your claim by some FED statements or sth?
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great video man keep it up :)
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Very nice video, quite informative.. Keep it Up..
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Great video as always. Is it just me or it the background music more ominous than usual?
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It's odd to hear metal gear solid 4 music in a video like this.
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Well done
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Another way to sum this analysis up: When a nation goes to war it consumes resources to do so. Labor, materials, energy, etc. all have to be expended in the war effort. So those resources have to come from somewhere - someone else has to reduce their consumption to offset the consumption of the war effort. The Bush administration didn't want to publicly force everyone to reduce their consumption by raising taxes, so instead they did it sneakily, by printing money and devaluing everyone's savings, stealing straight from our investments and held cash. This could work for a short term war, but is unsustainable for a long term war because eventually the inflation will become noticeable. It became noticeable in the rise in housing prices, but investors didn't properly understand it to be inflation driven by the war effort, and instead thought it was an easy way to make fast money so they piled into the housing market. The securities market packaged up the mortgage debt and sold it overseas, turning an American problem into a global problem. When the inflation was finally properly understood for what it was, the housing market collapsed and finally global consumption was reduced to offset the consumption generated by the war. We all finally realized we were poorer - we just didn't all realize we had spent our wealth on wars in Afghanistan and Iraq.
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Always thought provoking, even when wrong as in this case. You can't explain everything with geopolitics. The crisis was not started by the FED printing money to finance the Iraq war. Fearing the economy was going into a recession, a situation further exacerbated by the 9/11 attacks, the FED lowered the interest rates. Large investors shifted their investments from low interest bonds to more profitable mortgages. Mortgages were considered high profit safe investments due to the historically steady increase of housing prices and were triple-A rated by credit agencies. People having low interest loans at their disposal were buying, and credit institutions fighting to sell more mortgage backed securities to large investors were employing sub standard practices when approving credits. This drove housing prices further up. People started defaulting on their payments and eventually the bubble burst. The FED then injected cash into the banking system to prevent collapse, the government also increased spending to stimulate the economy now in recession, and the dodd frank law was passed to prevent risky loans.
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mortıç :) Great videos!
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Another great one!
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lol love the background music ... very tactical espionagy
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IMO government should control the housing industry. Like 90% of Singapores homes are public housing and they are doing fine and the people are happy. When people have the basic necessities they are happy and dont nag the government for other things.
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Thanks for your video. It help me to understand the situation
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