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Anyone wanting to understand the financial crisis should watch this The email I got today about it from Tim Evans of the Libertarian Alliance started “Dear All”, so I don’t know how many other bloggers have already noticed and linked to this. But like Tim, I strongly recommend it, having watched it earlier today. It’s an American banker (who is also a follower of Ayn Rand) talking about the financial crisis, why it happened and what to do about it. The circumstances he describes so confidently, convincingly and knowledgeably are American, but the message of the talk is universal. He uses the word “interesting” a lot, by which he mostly means “disastrous”.
Apologies for not having any time left over from watching it to add any thoughts of my own. But the thing itself is so good that I am sure I will be forgiven for simply recommending this remarkable talk. I daresay some may even prefer this.
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We are also a varied group made up of social individualists, classical liberals, whigs, libertarians, extropians, futurists, ‘Porcupines’, Karl Popper fetishists, recovering neo-conservatives, crazed Ayn Rand worshipers, over-caffeinated Virginia Postrel devotees, witty Frédéric Bastiat wannabes, cypherpunks, minarchists, kritarchists and wild-eyed anarcho-capitalists from Britain, North America, Australia and Europe.
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Just had a quick skip through the first few minutes, as it’s late, but I’ve already learned that what I call “That Basel II bullshit” is referred to in the US as “Fair Value Accounting”.
It still sucks, whatever you call it.
Seems the Ayn Rand site is blocked in China. Anyone know of another site with the video? Thanks!
Wow, great presentation. I’m not up on all things financial, but was easily able to glean much from this, and confirm what my gut knew all along; that government is the main culprit.
It also confirmed another suspicion of mine and that is that the world economy basically was halted in it’s tracks back in September when Sec. Paulson went into full-on panic mode. There has been nothing but irrationality and panic ever since, again primarily do to government action.
thanks for posting this link.
“House of Cards” by CNBC is also a great video for learning about the crisis- you can watch it for free on hulu.com if you want. It doesn’t really show where the blame really falls (probably in an attempt to stay neutral- although the effect might seem otherwise when watching it), but it does show all of the different components that created the mess. After some logical reasoning one can deduce that it was the government and not the free market that was responsible.
Logical reasoning? What’s up with this sudden optimism?
Hey, the ARC lecture series! I’ve been making my way through their videos over the past few months. Top quality stuff, I recommend them all.
Thanks for that Brian. It is nice to see that some CEOs of major companies are prepared to tell it like it is rather than meekly go along with the usual brain-dead statist nonsense. This all helps to counter the “narrative”.
What a phenomenally good lecture!
This is the clearest, most sensible talk on the causes of the financial meltdown I have seen – can’t recommend it enough!!
Now, if only a few politicians could spare 86 minutes to watch and soak in some knowledge – the world would be a better place!
The politicians are working for the bankers, and the bankers want your money.
Its obvious the politicians serve the banks; why else is the financial sector being cosseted and given huge welfare handouts of taxpayer’s money which no other sector of the economy would dare dream of getting?
Ask yourself, Why is the financial sector being treated with such ridiculous reverence.
It does not matter who we vote for, because the bankers own all the politicians. And soon, they will own us.
Basel is not Fair Value Accounting (although “Basel II bullshit” may be).
The banker did not put much stress on the two year old system of Fair Value Accounting – perhaps because an alternative would be to say “these securities are not cash – therefore they should not count in you accounts at all, even at the price someone is prepared to pay for them” an alternative bankers (good as well as bad) would like even less.
As the man pointed out the perverse regulations and subsidies have led to banks moving from about 1 to 1 captial to debt (before the Fed came along) to about 10 to 1 now.
In Europe (Basel mathematical model system) it is about 50 to 1 – so these banks are even worse.
His contempt for the mathematical models and for the Federal Reserve and for the regulatory agencies (including the supposedly “private” debt rating agencies – the same people who are claiming that U.S. government securities are still triple A even though the governement is overextended by many trillions of Dollars) was clear.
The details of each bust are different – the fundemental cause is always an increase in the money supply, but this is going to effect the economy differently depdending on a whole range of circumstances.
Sometimes one can make a good guess – such as that the Clinton 1999 push to Fannie Mae and Freddie Mac to go into “afordable housing” (subprime junk) would have destroy the market in ten years – it took nine, but that was a very good guess. Based on some mathematics – but not being a slave to it. Of course just destroying a large part of the real estate market would not have caused the present crises on its own.
Other detiails I liked – the Florida two years to really get possession of a house that has gone into default (not that there would be much of a house left after the two year occupation of course).
That is not a market – which means that the banker himself is wrong to lend money on home loans in Florida (unless he is lending money only to very high net worth individuals, very rich people, – people he can sue for the money because they have it in accounts).
Someone who lends money to an ordinary person in Florida to buy a house can not sensibly carry the mortgage (because it is worthless) – so they pass it on in securities to idiots who do not know what they buying.
Securities – people holding bits of various mortgages they know nothing about. The whole crazy division between the person selling the mortgage and the person holding it.
I also liked his explination of why the parent company of AIG was “saved” – because Goldmans depended on it (lots fo Goldman people in government).
And, of course, the vast buying of General Electric debt by the government.
General Electric – of NBC and so.
I have made these claims myself (both about AIG and Goldmans and about General Electric).
But I hate these people (because of their politics) so I am prone to believe any bad story about them, and I was not there.
This man was there – in the room, on all the relevant banking bodies.
He knows – whereas I just judge out of the context of my own hatred.
Although it is gratifying to have my hate filled assumptions confirmed.
One point on the TARP – methinks he protested too much about how his bank was forced to take the loan money from the government.
Some banks (even in California) that are not much smaller than his own, refused.
Of course, no doubt, there are different technical factors.
The mortgage bailout will no doubt have horrified him – and so it should.
One point about my previous comment.
1 for 1 captial to debt ratio is still high – the pre 1913 situation was far from ideal. Although vastly better (ten times better) than the pre crises situation last year.
As for the present situation – yell, scream, hide under the bed.
Exactly the sort of panic the man does not want.
But the sort of panic that the govenrment interventions make inevitable.
He is correct by the way – if AIG (and the rest – bar Freddie and Fannie, he was right there was a legal contact for these vile organizations) had been allowed to go bust last year, the recession would be touching bottom about now.
It would be much worse than now (unemployment would be higher than 8.1 per cent), but things would be starting to look better.
Now there is no chance of that – things will get worse, much worse.
The future – who will say “we must close down Freddie and Fannie as soon as the debt is paid off”.
Who will say “we must get rid of government banking insurance”.
Who will say “we must allow other rating agencies to operate”.
Who will say “there must be an end to this spider’s web of regulations with the demand that banks bankrupt themselves by following mathematical models that do not understand the real world – because no model can”.
Who will say “we must get rid of the Federal Reseve System”.
If the reply is “no one of importance” then there is little hope for the future.