Title: Chapter 8: The Financial Sector Crisis and Its Aftermath
1Chapter 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
2Patterns of Financial CrisesContrary to
conventional wisdom, crises are not black swans
but white swans the elements of boom and bus are
remarkably predictable.
3Nassim Talebs Criterion for Identifying a Black
Swan Event
- The event is a surprise (to the observer).
- The event has a major impact.
- After its first recording, the event is
rationalized by hindsight, as if it could have
been expected.
4Tulip Mania
5The Roaring Twenties and the Stock Market Crash
of 1929
6Dot-Com Bubble
7Dot-Com NASDAQ Spiked and Fell
8Ikeda and Kennedy, 1961
9Plaza Accord
10Tokyos Imperial Palace
11Nikkei 222, Japans Stock Market
12East Asian Financial Crisis, 1997-98
13Major Events of the Asian Financial Crisis
1997-1998
- Financial liberalization pushed by IMF U.S.
Treasury. - Foreign funds seek quick high returns.
- Over-investment, leading to a bubble.
- Panicky withdrawal of funds, fall in prices.
- Bailout of foreign speculators by IMF.
- Collapse of real economy recession.
14Bangkok, Thailand
15The Fall of Lehman Brothers
16Emanuel and Mayer Lehman
17Dick Fuld
18Ameriquest Blimp
19Subprime Mortgages Falling 2007
20Investment Bank Bear Stearns
21Fannie Mae, Waivered 2008
22Franklin Raines, CEO of Fannie Mae
23Conservatorship of Fannie Mae and Freddie Mac
24Lehman Brothers, September 15, 2008
25AIG Head-quarters
26Money Market FundsBroke the Buck
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29Federal Reserve Flag
30Quantitative Easing
31TARP
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33The New Normal The 5 Rs
- Revolution
- Restore
- Reaction
- Reform
- Rebuild
34Revolution
35Restore
36Anti-Austerity Rally, Greece
37Tea Party, Austerity Rally
38Inequality
39Gender Income Inequality
40Income Inequality
41Reform Financial Reform
42Paul Volcker author of the Volcker Rule
43Reform Consumer Financial Protection Bureau
44Rebuild
- Emphasizing Small and Local
- Challenging the Growth Model
- Renewing Public Ownership
- Healing our Planet
- Creating Shared Values
45Small And Local
46Challenging the Growth Model
47Social Enterprises
48Public Ownership
49Healing the Planet
50Changing to Shared Values