Chapter 8: The Financial Sector Crisis and Its Aftermath

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Chapter 8 The Financial Sector Crisis and Its
Aftermath

• Ideas, knowledge, art, hospitality, travel
  these are the things which should of their nature
  be international. But let goods be homespun
  whenever it is reasonably and conveniently
  possible and above all, let finance be primarily
  national.
• John Maynard Keynes

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Patterns of Financial CrisesContrary to
conventional wisdom, crises are not black swans
but white swans the elements of boom and bus are
remarkably predictable.
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Nassim Talebs Criterion for Identifying a Black
Swan Event

1. The event is a surprise (to the observer).
2. The event has a major impact.
3. After its first recording, the event is
   rationalized by hindsight, as if it could have
   been expected.

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Tulip Mania
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The Roaring Twenties and the Stock Market Crash
of 1929
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Dot-Com Bubble
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Dot-Com NASDAQ Spiked and Fell
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Ikeda and Kennedy, 1961
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Plaza Accord
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Tokyos Imperial Palace
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Nikkei 222, Japans Stock Market
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East Asian Financial Crisis, 1997-98
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Major Events of the Asian Financial Crisis
1997-1998

1. Financial liberalization pushed by IMF U.S.
   Treasury.
2. Foreign funds seek quick high returns.
3. Over-investment, leading to a bubble.
4. Panicky withdrawal of funds, fall in prices.
5. Bailout of foreign speculators by IMF.
6. Collapse of real economy recession.

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Bangkok, Thailand
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The Fall of Lehman Brothers
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Emanuel and Mayer Lehman
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Dick Fuld
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Ameriquest Blimp
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Subprime Mortgages Falling 2007
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Investment Bank Bear Stearns
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Fannie Mae, Waivered 2008
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Franklin Raines, CEO of Fannie Mae
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Conservatorship of Fannie Mae and Freddie Mac
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Lehman Brothers, September 15, 2008
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AIG Head-quarters
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Money Market FundsBroke the Buck
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Federal Reserve Flag
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Quantitative Easing
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TARP
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The New Normal The 5 Rs

1. Revolution
2. Restore
3. Reaction
4. Reform
5. Rebuild

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Revolution
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Restore
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Anti-Austerity Rally, Greece
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Tea Party, Austerity Rally
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Inequality
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Gender Income Inequality
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Income Inequality
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Reform Financial Reform
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Paul Volcker author of the Volcker Rule
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Reform Consumer Financial Protection Bureau
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Rebuild

1. Emphasizing Small and Local
2. Challenging the Growth Model
3. Renewing Public Ownership
4. Healing our Planet
5. Creating Shared Values

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Small And Local
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Challenging the Growth Model
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Social Enterprises
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Public Ownership
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Healing the Planet
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Changing to Shared Values