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[The Federal Reserve has cut its key interest rate to the lowest level…]

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[Crisis will happen…]

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[The biggest fiscal stimulus we have ever seen…]

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[We’re in the midst of a serious financial crisis

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and the federal government is responding with decisive action…]

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Have you taken a large home loan?

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Or did you put your savings in stocks, mutual funds or bonds?

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If not, than you can relax.

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But all of us who did are living on borrowed time.

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This is the story of the greatest financial crisis of our time.

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The one that is on its way.

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They spent hundreds of billions of dollars to show that they were doing something

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but not properly designed and not as effective as it should’ve been.

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When they start losing money, “Hey, we gotta get back in the game,

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“we gotta get theirs dice rolling again, hey, let’s create another bubble.

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“You think the dot-com bubble was too big? We’ve got a bigger one for you…”

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Well, the problem is they never actually cured the crisis.

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Right, they just give alcohol to a drunk.

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It doesn’t sober him up, it just sets him up for, you know, a bigger hangover.

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And that’s all we’ve done, and that’s all we’re trying to do.

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And so I know at some point you kill the patient, right.

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At some point you can’t drink any more.

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It’s just, it’s just the end of it. You reach the end of the ability.

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And that’s where we are…

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Congress wanted to believe them.

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Congress wanted an excuse to bail out the autoworkers

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and the executives gave them just enough political cover to say:

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“Aah, well, I’m not really doing this because I want autoworker votes

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“and I’m gonna give them huge amount of money.

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“I’m really doing this for the American economy.”

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So, the solution is the problem.

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That’s why we have the problem in the first place.

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This is the danger in protecting investors and consumers

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from the consequences of their own decisions.

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Overdose: The Next Financial Crisis

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We can do it. But we need to do it soon

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because the clock is ticking and time is not working in our favor.

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I know many Americans have questions tonight.

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How did we reach this point in our economy

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and what does this mean for your financial future?

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These are good questions and they deserve clear answers.

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They took down the symbols… the financial symbols of America.

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The twin towers of the world trade.

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[Today we’ve had a national tragedy.]

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[Two airplanes have crashed into the World Trade Center.]

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Uhm, my, my old company… my whole com… where I used to work

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the whole company is missing.

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The story of the great financial crisis

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begins just like many of the stories of our era.

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In the United States, on September 11th, 2001.

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The terrorists knew exactly what they were doing.

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Striking at the ultimate symbol of the global economy.

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And they did it when the US was already slumping into a recession

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after the dot-com bubble had burst.

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[Chairman of the U.S. Federal Reserve] Despite the tragic events of September 11th,

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the foundations of our free society remain sound

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and I’m confident that we will recover and prosper as we have in the past.

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In spring 2001 the Federal Reserve started lowering interest rates

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and now it continued lowering rates

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to save companies on the brink and to keep unemployment down.

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During 2001 the interest rate was lowered from 6.5% to 1.75%.

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In 2003 it was cut all the way to 1% and it remained there for a full year.

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Predicting the panic of ’08, the economic 9/11

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and the current economic crisis that we’re still in

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was probably one of the easiest forecasts we’ve ever made

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in our 30 years of trend forecasting.

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It was very simple.

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Gerald Celente lives in Kingston, a few miles north from New York.

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He’s one of the top trend analysts in the US.

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He’s been called a modern Nostradamus.

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He didn’t just predicted current crisis,

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he also predicted the dot-com bubble and the stock market collapse of 1987.

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Immediately after 9/11 the president of the United States George W. Bush

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told the people to be good Americans and go out and shop.

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But how are they going to do it? You’re in a recession.

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Federal Reserve comes to the rescue.

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In his memoir, Federal Reserve chairman Alan Greenspan writes

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that he knew that low interest rates might cause a bubble.

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[It’s party time.]

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Traditionally, central banks remove the punch bowl

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once the party stops.

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The interest rate can’t remain low for too long

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or people will do things they’ll regret later.

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[This is one party that just has to turn out right…]

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[Well, the purpose of a party is to have fun together

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and a successful party needs planning and skill…]

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Greenspan argued that the Fed should never remove the punch bowl

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but rather keep refilling it when the party started to peter out.

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And if things went bad, the Fed would clean up the mess

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and tend to the hangover.

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Banks and speculators loved it.

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Now they could take greater risks than ever before.

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If they were successful, they could keep the profits.

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And if they were unlucky, Greenspan would rescue them.

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[Mama’s that way.

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Let me come home crying over something and she’d get me candy every time.]

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When you see the stock market come down and real estate bubble burst

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all that phoney wealth is gonna evaporate

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and all that’s gonna be left is all the debt we’ve accumulated to foreigners…

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Peter Schiff is another analyst who was roundly mocked

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when he predicted the crisis for the US economy in the midst of the boom.

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We went on a unprecedented global spending binge.

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American citizens borrowed and spent trillions of dollars to buy stuff

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and that is why we’re in so much trouble.

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It was because we got drunk on all that Fed alcohol.

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FED ALCOHOL

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In a world that was suddenly uncertain with the country under attack

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nothing felt safer than investing in your own home.

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In the American Dream.

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I do believe in the American Dream. [17 June 2002]

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I believe there’s such a thing as the American Dream.

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Owning a home is a part of that dream.

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It just is. Right here in America, if you own your own home,

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you’re realising the American Dream.

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Vernon Smith was awarded the Nobel prize in economics in 2002.

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He received it for his research in experimental economics.

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In his experiments he puts economic theories to the test.

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Smith is an expert on bubbles.

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If you can buy a home with almost nothing down

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then you do well if the prices continue to go up.

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If it goes down, well, then you have an incentive to walk away from it

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and let the bank have it.

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Low interest rates caused a housing bubble.

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Cheap loans encouraged people to buy more and bigger homes.

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Housing prices began to rise by 10% a year.

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So many took out a second mortgage on their old house to fund consumption.

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You wanna go on a vacation, buy some new clothes?

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How about putting an addition on your house?

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You don’t have the money?

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How about a home equity loan? That’s for you.

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Let’s use your house as a piggy bank.

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The banks granted loans to almost anyone.

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Why would you need a decent income to buy a home

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if you can get rich just living in it?

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The market even coined the term NINA loans.

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No income?

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No assets?

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No problem!

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You’ll get a loan, anyway.

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The legislation was more aggressively pushing lenders

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to lend to people of modest means, people with… whose incomes

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were 80% of the median income or below.

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Politicians encouraged this.

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For a long time both the left and the right have been encouraging home ownership.

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So they’ve created deductions, subsidies and insurances.

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And they created two huge mortgage-financing companies.

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Fannie Mae and Freddie Mac.

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Their job was to use thousands of billions of dollars

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to insure loans for people who couldn’t get them on the open market.

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They were government-sponsored enterprises.

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They had private owners but they had been created by Congress

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and their transactions were guaranteed by the government.

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[Former Chief Economist, Freddie Mac] So, there’re particularly Fannie Mae and Freddie Mac

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government-sponsored enterprises

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and what it means is, er, they’re private, not now maybe. But they’re private companies

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that have special charters from the government.

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And the thing about government-sponsored enterprises

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which is the main thing people are talking about

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is a sense that they’re guaranteed by the government.

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[17 June 2002] First of all, government-sponsored corporations

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that helped create our mortgage system,

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I introduced two of the leaders here today,

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they call those people Fannie Mae and Freddie Mac

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as well as the Federal Home Loan Banks,

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will increase their commitment to minority markets

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by more than 440 billion dollars.

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In the last decade, Fannie Mae and Freddie Mac have donated

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more than 200 million dollars to politicians in Washington.

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Enterprise-sponsored government.

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I asked the former Freddie Mac chief economist

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what they got for their money.

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I don’t know.

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I mean, I… that’s a tougher question, ehm,

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they had a pretty good charter, ehm,

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they, they have… they were regulate in a spotty way.

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In many ways the regulatory structure wasn’t that bad

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but it was the case that the regulatory structure was a compromise.

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It wasn’t the Treasury, it wasn’t the Housing really,

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it was some… somewhere in between.

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There was a huge moral hazard

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courtesy of the government in the mortgage market.

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When the government, through Fannie and Freddie,

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started to guarantee mortgages, then the lenders were no longer

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worried about getting their money back because the government said:

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“We guarantee it.”

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And so that’s why I proposed and urge Congress

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to fully fund the American Dream Down Payment Fund.

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This will use money, er, taxpayer’s money to help

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a qualified, low-income buyer make a down payment.

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Well, greed has to be balanced with a certain amount of fear

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and that’s what down payment rules were all about. And amortisation rules.

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It is to keep people from carried away by, as you say, the greed

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of expecting become rich by buying a home

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and reselling at a higher price.

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And that’s important. If one of the barriers to home ownership

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is the inability to make a down payment

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and if one of the goals is to increase home ownership,

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it makes sense to help people pay that down payment.

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This is the problem.

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The moral hazard.

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We gave a moral hazard to home buyers.

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Once you say that you can by a home with no down payment,

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all of a sudden there’s no risk to the borrower.

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He doesn’t care if he overpays

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because if the house keeps going up, he makes money.

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If it stops going up, the bank loses the money.

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You know, we have moral hazards in our banking system.

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The US government guarantees all bank deposits.

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Well, what does that mean?

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That means that depositers don’t care what the banks do

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with their money once they deposit it.

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Because they know the government guarantees it.

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And the federal government obviously has to play an important role.

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And we will, we will, I mean… when I lay out a goal, I mean it.

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Why are they doing that?

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Why can’t we let mortgages be financed in the private sector?

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The reason is because the private sector would not finance

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these crazy mortgages and real estate prices would have to come down

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to levels that people can actually afford.

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How can you promote home ownership if people can’t afford a home?

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The big banks dared to make riskier loans

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because they had started repackaging loans

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and selling them to others as securities.

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They sold them to each other,

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to Fannie Mae and Freddie Mac

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and they sold them to Norway, to Germany and to China.

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If the loans turned bad,

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someone else would end up with a hot potato.

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I guess we’re little early. What do you want to do?

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Anything but inspect this temple of capitalism.

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Oh, Nick.

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Look at them, their eyes popping out of their heads.

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Drooling over the very things that are taking away their jobs.

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Now Nick, don’t get all excited.

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My family think that America is a pretty swell place

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and I don’t want you to disillusion them.

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I know.

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Everybody wanted to buy

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because the rating agencies that rate securities

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gave the mortgage-backed bonds their highest rating.

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They promised huge payoffs at near zero risk.

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The rating agencies thought that house prices would just keep rising.

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And then there was that minor detail

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that the rating agencies were being paid by the sellers of the securities.

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So I think the process was corrupted. First of all,

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the government licenses Moody’s and Standard & Poor’s

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00:15:36,604 --> 00:15:39,006
so there’s only a few companies who are authorised

248
00:15:39,006 --> 00:15:40,039
to rate these bonds.

249
00:15:40,039 --> 00:15:42,643
So it wasn’t really a free market, the government was in bed

250
00:15:42,643 --> 00:15:45,379
with Moody’s and with Standard & Poor’s.

251
00:15:45,379 --> 00:15:48,073
But also you had this perverse relationship

252
00:15:48,073 --> 00:15:50,209
between Wall Street and the rating agencies

253
00:15:50,209 --> 00:15:52,902
where they were paying the rating agencies

254
00:15:52,902 --> 00:15:55,410
to rate the products that they were structuring.

255
00:15:55,410 --> 00:15:58,405
And so there was, you know, this was an incestuous relationship where

256
00:15:58,405 --> 00:16:01,228
they knew if they put bad ratings on them, they wouldn’t sell

257
00:16:01,228 --> 00:16:03,964
and if they didn’t sell, they wouldn’t be making all this money

258
00:16:03,964 --> 00:16:05,509
constantly rating them.

259
00:16:07,926 --> 00:16:09,528
They were great days.

260
00:16:09,528 --> 00:16:12,500
But it was all based on a market on steroids.

261
00:16:12,500 --> 00:16:16,772
Loans were cheap enough to keep trying the housing prices up.

262
00:16:16,772 --> 00:16:21,068
But when interest rates returned to normal levels in 2006,

263
00:16:21,068 --> 00:16:22,716
the spell was broken.

264
00:16:23,317 --> 00:16:26,571
But for one person the future was still bright.

265
00:16:26,571 --> 00:16:27,521
Ben Bernanke,

266
00:16:27,521 --> 00:16:31,446
Alan Greenspan’s successor as Federal Reserve chairman.

267
00:16:31,812 --> 00:16:34,025
[29 July 2005] Tell me, what is the worst-case scenario

268
00:16:34,025 --> 00:16:37,624
if in fact we were to see prices come down substantially

269
00:16:37,624 --> 00:16:39,296
across the country?

270
00:16:39,296 --> 00:16:40,759
Well, I guess I don’t buy your premise,

271
00:16:40,759 --> 00:16:42,523
it’s a pretty unlikely possibility,

272
00:16:42,523 --> 00:16:47,049
we’ve never had a decline in house prices on a nationwide basis.

273
00:16:48,259 --> 00:16:51,845
People could no longer get new loans to pay off the old ones.

274
00:16:51,845 --> 00:16:55,480
Those who had been given a mortgage despite a very low income

275
00:16:55,480 --> 00:16:57,198
couldn’t afford to stay.

276
00:16:57,198 --> 00:16:59,253
The prices started falling,

277
00:16:59,253 --> 00:17:02,990
making the mortgage-backed securities increasingly worthless.

278
00:17:02,990 --> 00:17:05,392
[28 February 2007] There’s not much indication at this point that

279
00:17:05,392 --> 00:17:09,896
subprime mortgage issues have spread into the broader mortgage market

280
00:17:09,896 --> 00:17:11,632
which still seems to be healthy.

281
00:17:11,632 --> 00:17:16,000
The rating agencies removed the high ratings from the securities.

282
00:17:16,000 --> 00:17:18,806
Investors, who never looked beyond the ratings,

283
00:17:18,806 --> 00:17:21,308
suddenly didn’t know what they had bought.

284
00:17:21,308 --> 00:17:24,345
They didn’t know how risky those loans were.

285
00:17:24,345 --> 00:17:27,681
[Chairman of the U.S. Federal Reserve, 18 July 2007] Overall the US economy appears likely to expand at a moderate pace

286
00:17:27,681 --> 00:17:30,565
over the second half of 2007

287
00:17:30,565 --> 00:17:33,687
with growth and strengthening a bit in 2008

288
00:17:33,687 --> 00:17:36,723
to a rate close to the economy’s underlining trend.

289
00:17:37,892 --> 00:17:40,761
The dominoes started falling.

290
00:17:40,761 --> 00:17:44,231
Investors stopped buying mortgage-backed securities

291
00:17:44,231 --> 00:17:47,301
and refused to lend to those who depended on them.

292
00:17:47,735 --> 00:17:50,938
Investment banks like Bear Stearns and Lehman Brothers

293
00:17:50,938 --> 00:17:55,009
suddenly couldn’t get new loans to stay in business.

294
00:17:55,009 --> 00:17:59,613
Fannie Mae and Freddie Mac could no longer hide the disaster.

295
00:18:01,649 --> 00:18:04,585
The financial crisis started in a way

296
00:18:04,585 --> 00:18:08,289
that is eerily similar to today’s situation.

297
00:18:08,289 --> 00:18:11,759
It started with an economic crisis in the US

298
00:18:11,759 --> 00:18:14,828
and a government that responded decisively.

299
00:18:14,828 --> 00:18:17,631
After 9/11 and the dot-com collapse

300
00:18:17,631 --> 00:18:20,601
the US government decided to save the economy

301
00:18:20,601 --> 00:18:23,270
by inflating a new bubble.

302
00:18:23,270 --> 00:18:27,174
Today, the world is trying to get out of the financial crisis

303
00:18:27,174 --> 00:18:29,710
by inflating a new bubble.

304
00:18:29,710 --> 00:18:34,648
The difference is that this bubble is much bigger.

305
00:18:44,458 --> 00:18:47,895
After they did the dot-com bubble and that burst

306
00:18:47,895 --> 00:18:51,765
and they re-inflated it with the real estate and credit crisis bubble

307
00:18:51,765 --> 00:18:53,133
and then when that burst,

308
00:18:53,133 --> 00:18:56,303
now they’ve created the bubble of all bubbles.

309
00:18:56,303 --> 00:19:01,239
It’s not only the United States, this is a global bubble, they’re all in to it.

310
00:19:01,239 --> 00:19:02,977
It’s called the bailout bubble.

311
00:19:02,977 --> 00:19:06,547
“Hey, the economy is going down, recession’s setting in,

312
00:19:06,547 --> 00:19:11,051
“sales don’t look good, exports soft, need more money?

313
00:19:11,051 --> 00:19:15,055
“How about, we’ll call it, stimulus packages?”

314
00:19:15,055 --> 00:19:19,000
And from Australia to the United States,

315
00:19:19,000 --> 00:19:21,595
from the UK to China

316
00:19:21,595 --> 00:19:27,034
they’re dumping funny money into the system to keep it going.

317
00:19:29,403 --> 00:19:34,235
In September of 2008 the US economy is near collapse.

318
00:19:34,235 --> 00:19:38,178
Fannie Mae and Freddie Mac have been taken over by the government.

319
00:19:39,480 --> 00:19:44,084
On September 15th giant investment bank Lehman Brothers goes bankrupt

320
00:19:44,084 --> 00:19:47,221
after monumental bets on real estate.

321
00:19:47,688 --> 00:19:50,535
AIG, the largest insurance company in the world,

322
00:19:50,535 --> 00:19:52,560
collapses the next day.

323
00:19:52,560 --> 00:19:54,194
Fear sets in.

324
00:19:54,194 --> 00:19:56,463
It seems like anyone can fail.

325
00:19:56,463 --> 00:20:01,268
Suddenly, banks no longer dare make loans to companies or each other.

326
00:20:02,503 --> 00:20:06,440
Experts warn that the economy is about to collapse.

327
00:20:09,643 --> 00:20:12,513
[The CBS News Special Report]

328
00:20:12,513 --> 00:20:15,288
[A presidential address to the nation.]

329
00:20:15,288 --> 00:20:20,221
[From CBS News headquarters in New York here is Katie Couric.]

330
00:20:20,221 --> 00:20:21,322
Good evening, everyone.

331
00:20:21,322 --> 00:20:24,491
President Bush asked the networks for this television time

332
00:20:24,491 --> 00:20:28,162
so he could talk directly to you about a national crisis.

333
00:20:28,162 --> 00:20:30,764
Some of this country’s major financial institutions

334
00:20:30,764 --> 00:20:34,134
are in danger of collapsing under the weight of bad mortgages

335
00:20:34,134 --> 00:20:37,072
and that would be devastating for the entire economy.

336
00:20:37,972 --> 00:20:41,308
We’re in the midst of a serious financial crisis

337
00:20:41,308 --> 00:20:44,712
and the federal government is responding with decisive action.

338
00:20:48,682 --> 00:20:50,985
$700 billion

339
00:20:50,985 --> 00:20:54,655
In a televised speech Bush scares the market even more

340
00:20:54,655 --> 00:20:57,524
while still claiming that they can trust him.

341
00:20:57,524 --> 00:20:59,522
He has a solution.

342
00:20:59,522 --> 00:21:01,195
Under our proposal the federal government

343
00:21:01,195 --> 00:21:05,000
would put up to 700 billion taxpayer dollars on the line

344
00:21:05,000 --> 00:21:08,435
to purchase trouble assets that are clogging the financial system.

345
00:21:16,377 --> 00:21:19,947
The US government wants to spend huge amount on Wall Street banks

346
00:21:19,947 --> 00:21:21,749
to cover their bad deals.

347
00:21:21,749 --> 00:21:23,651
Even banks who don’t want the money

348
00:21:23,651 --> 00:21:25,319
will be forced to take it

349
00:21:25,319 --> 00:21:27,721
so that the public won’t know which banks

350
00:21:27,721 --> 00:21:30,357
are on the brink of collapse.

351
00:21:31,825 --> 00:21:33,494
[All those in favor say “I”.]

352
00:21:33,494 --> 00:21:34,528
[I…]

353
00:21:34,528 --> 00:21:36,397
[Opposed say “no”.]

354
00:21:36,397 --> 00:21:37,898
[The I’s have it.]

355
00:21:40,935 --> 00:21:42,236
I want to thank the Secretary of Treasury

356
00:21:42,236 --> 00:21:44,338
for working hard with the members

357
00:21:44,338 --> 00:21:45,839
and thank the members for working long hours

358
00:21:45,839 --> 00:21:47,575
like they’ve been doing to come up with this solution

359
00:21:47,575 --> 00:21:50,544
that’s bipartisan and that’ll solve the problem.

360
00:21:50,544 --> 00:21:55,415
On October 3rd Congress approves the biggest financial bailout in history.

361
00:21:56,450 --> 00:21:59,786
700 billion dollars.

362
00:22:01,689 --> 00:22:03,023
Around the world,

363
00:22:03,023 --> 00:22:07,161
in Germany, Italy, Canada, South Korea and Great Britain,

364
00:22:07,161 --> 00:22:10,831
other politicians do the same to save their banks.

365
00:22:18,305 --> 00:22:21,508
We’ve taken the right, the decisive and the tough decision

366
00:22:21,508 --> 00:22:24,411
that was necessary to protect the stability of the financial system

367
00:22:24,411 --> 00:22:27,047
and to protect the depositors.

368
00:22:29,083 --> 00:22:34,321
David Walker was US Comptroller General from 1998 to 2008.

369
00:22:34,321 --> 00:22:37,625
He quit because he was so worried about the US economy

370
00:22:37,625 --> 00:22:41,695
that he wanted to have the freedom to warn about what may happen.

371
00:22:41,962 --> 00:22:44,398
In my view,

372
00:22:44,398 --> 00:22:49,036
the bailout was necessary in certain regards

373
00:22:49,036 --> 00:22:53,507
but in many cases we wasted a lot of money.

374
00:22:53,507 --> 00:22:55,442
Because we didn’t do three things.

375
00:22:55,442 --> 00:22:58,345
First, have clearly defined objectives

376
00:22:58,345 --> 00:23:00,281
about what we were trying to achieve.

377
00:23:00,281 --> 00:23:03,617
Secondly, have criteria established up front

378
00:23:03,617 --> 00:23:06,954
as to who would get the money and who wouldn’t get the money.

379
00:23:06,954 --> 00:23:10,491
And number three, have conditions established up front

380
00:23:10,491 --> 00:23:13,460
as to what they could and couldn’t do with the money.

381
00:23:13,460 --> 00:23:16,196
And as a result of not having those three things,

382
00:23:16,196 --> 00:23:19,333
some people got the money that didn’t deserve it,

383
00:23:19,333 --> 00:23:22,736
other people got the money that didn’t make good use of it

384
00:23:22,736 --> 00:23:27,441
and as a result we had a lot of waste with regard to taxpayer money.

385
00:23:27,441 --> 00:23:31,178
[19 November 2008] What would it mean if the domestic industry were allowed to fail?

386
00:23:31,178 --> 00:23:33,881
You heard Senator Stabenow…

387
00:23:33,881 --> 00:23:35,616
As a result of the crisis

388
00:23:35,616 --> 00:23:39,253
the situation for the US auto industry becomes critical.

389
00:23:39,253 --> 00:23:43,423
On November 19th their CEOs fly to Washington to demand money.

390
00:23:44,358 --> 00:23:47,361
[Business and economics editor] The executives came out and they said:

391
00:23:47,361 --> 00:23:50,598
“If you don’t do this,

392
00:23:50,598 --> 00:23:54,101
“we are going to see a jobs holocaust.”

393
00:23:54,101 --> 00:23:58,138
They issued extremely high estimates of how many jobs would be lost

394
00:23:58,138 --> 00:23:59,874
that included counting every single company

395
00:23:59,874 --> 00:24:01,642
that supplies them with anything.

396
00:24:02,176 --> 00:24:05,312
That’s why this is all about a lot more than just Detroit.

397
00:24:05,312 --> 00:24:09,250
It’s about saving the US economy from a catastrophic collapse.

398
00:24:09,250 --> 00:24:12,419
A month later president Bush gives billions of dollars

399
00:24:12,419 --> 00:24:14,722
to General Motors and Chrysler.

400
00:24:14,722 --> 00:24:16,857
The money comes from the bailout package

401
00:24:16,857 --> 00:24:20,407
that was really only designed to save the financial industry.

402
00:24:20,407 --> 00:24:21,795
[Now, some US auto executives say

403
00:24:21,795 --> 00:24:23,931
that their companies are nearing collapse.]

404
00:24:25,399 --> 00:24:28,836
[And that the only way they can buy time to restructure

405
00:24:28,836 --> 00:24:31,105
is with help from the federal government.]

406
00:24:31,105 --> 00:24:34,441
Megan McArdle is a financial analyst for the Atlantic

407
00:24:34,441 --> 00:24:38,245
and has written extensively about the problems of the US auto industry.

408
00:24:38,245 --> 00:24:42,283
Congress wanted an excuse to bail out the autoworkers

409
00:24:42,283 --> 00:24:46,153
and the executives gave them just enough political cover to say:

410
00:24:46,153 --> 00:24:50,190
“Aah, well, I’m not really doing this because I want autoworker votes

411
00:24:50,190 --> 00:24:52,459
“and I’m gonna give them huge amount of money.

412
00:24:52,459 --> 00:24:54,562
“I’m really doing this for the American economy.”

413
00:24:54,562 --> 00:24:56,864
But if you look at how much money we gave them,

414
00:24:56,864 --> 00:24:59,199
I mean, we’re talking about almost a hundred billion dollars,

415
00:24:59,199 --> 00:25:01,335
it’s how much we’ll end up spending on this.

416
00:25:01,335 --> 00:25:04,004
You know, even if you were saving millions of jobs,

417
00:25:04,004 --> 00:25:06,507
it would’ve been cheaper to give every single one of those people

418
00:25:06,507 --> 00:25:10,244
100,000 dollars to go out and find a new job.

419
00:25:10,844 --> 00:25:12,613
The big guys on Wall Street,

420
00:25:12,613 --> 00:25:14,582
they can’t take their losses.

421
00:25:14,582 --> 00:25:17,251
They’re crybaby capitalists.

422
00:25:17,251 --> 00:25:22,523
Oh, they preach capitalism for everybody but themselves.

423
00:25:25,559 --> 00:25:28,429
[16 December 2008]

424
00:25:32,499 --> 00:25:34,969
[The Federal Reserve has cut its key interest rate

425
00:25:34,969 --> 00:25:36,971
to the lowest level on record.]

426
00:25:36,971 --> 00:25:39,773
[Fed chairman Ben Bernanke and his colleagues also pledge

427
00:25:39,773 --> 00:25:43,878
to use all available tools to contain the widening crisis

428
00:25:43,878 --> 00:25:46,513
and the longest recession in a quarter century.]

429
00:25:49,984 --> 00:25:52,653
December 16th, 2008.

430
00:25:52,653 --> 00:25:56,824
It is time again to pour alcohol into the punch bowl.

431
00:25:56,824 --> 00:26:00,694
The Federal Reserve reduces interest rates to practically zero

432
00:26:00,694 --> 00:26:03,030
to restore investor confidence.

433
00:26:03,030 --> 00:26:05,766
Other central banks do the same.

434
00:26:06,901 --> 00:26:09,403
Hey, have no credit? Don’t worry about it.

435
00:26:09,403 --> 00:26:11,939
Just sign on the dotted line.

436
00:26:11,939 --> 00:26:14,442
INSERT COIN

437
00:26:14,742 --> 00:26:16,544
The housing bubble that they inflated

438
00:26:16,544 --> 00:26:19,914
blew up with all the carnage and all the bankruptcies

439
00:26:19,914 --> 00:26:21,248
and now what is their solution?

440
00:26:21,248 --> 00:26:23,250
“We’ll just do the same thing we did before.”

441
00:26:23,250 --> 00:26:26,787
Instead of having interest rates at 1%, let’s have them at zero.

442
00:26:26,787 --> 00:26:30,457
And let’s buy everything we can. Let’s print money and buy mortgages.

443
00:26:30,457 --> 00:26:32,359
Let’s buy credit card debts, student loans.

444
00:26:32,359 --> 00:26:35,362
Let’s buy bonds, let’s drop money from helicopters

445
00:26:35,362 --> 00:26:40,334
to try to get the same risk taking, excessive gambling on Wall Street

446
00:26:40,334 --> 00:26:43,837
Let’s try to convince Americans, who are already loaded up on debt,

447
00:26:43,837 --> 00:26:47,208
to go out and buy more stuff, to go out and go deeper in the debt.

448
00:26:47,208 --> 00:26:48,809
And if the banks don’t want to lend them money,

449
00:26:48,809 --> 00:26:50,444
let’s make ’em lend them money.

450
00:26:50,444 --> 00:26:53,447
I mean, this is economic, you know, suicide.

451
00:26:54,982 --> 00:26:56,850
While the Fed lowers interest rates,

452
00:26:56,850 --> 00:27:00,721
president elect Barack Obama prepares an enormous stimulus package,

453
00:27:00,721 --> 00:27:03,524
meant to get the US economy going.

454
00:27:06,293 --> 00:27:10,998
We are running out of the traditional ammunition

455
00:27:10,998 --> 00:27:12,333
that’s used in a recession,

456
00:27:12,333 --> 00:27:14,587
which is to lower interest rates,

457
00:27:14,587 --> 00:27:17,004
they’re getting to be about as low as they can go.

458
00:27:20,975 --> 00:27:23,043
$787 billion

459
00:27:24,345 --> 00:27:26,447
[17 February 2009] The American Recovery and Reinvestment Act

460
00:27:26,447 --> 00:27:28,349
that I will sign today,

461
00:27:28,349 --> 00:27:32,519
a plan that meets the principles I laid out in January,

462
00:27:32,519 --> 00:27:35,789
is the most sweeping economic recovery package

463
00:27:35,789 --> 00:27:37,491
in our history.

464
00:27:38,726 --> 00:27:43,397
On February 7th, 2009 Obama approves a stimulus package

465
00:27:43,397 --> 00:27:47,034
worth 787 billion dollars.

466
00:27:47,034 --> 00:27:50,538
With the Bush stimulus package from the year before

467
00:27:50,538 --> 00:27:53,874
US politicians have now spent close to one trillion dollars

468
00:27:53,874 --> 00:27:56,443
to stimulate the US economy.

469
00:27:56,443 --> 00:28:01,015
The money is spent on roads, airports, education, unemployment

470
00:28:01,015 --> 00:28:02,850
and other benefits.

471
00:28:02,850 --> 00:28:05,019
There is bureaucracy in everywhere.

472
00:28:06,220 --> 00:28:10,491
And in Italy they used to say, where I’m from.

473
00:28:10,491 --> 00:28:16,096
When you have a jar of honey, you lick your fingers.

474
00:28:21,035 --> 00:28:25,005
The town of Union is located a few hours from the Canadian border.

475
00:28:25,005 --> 00:28:27,875
This is where the computer company IBM got its start

476
00:28:27,875 --> 00:28:30,244
and grew to be the biggest in the world.

477
00:28:30,244 --> 00:28:32,379
The factories are now empty

478
00:28:32,379 --> 00:28:35,724
but the town has acquired a small town rhythm.

479
00:28:35,724 --> 00:28:39,086
So they were surprised when 600,000 dollars

480
00:28:39,086 --> 00:28:43,557
from the stimulus package arrived to combat homelessness.

481
00:28:44,225 --> 00:28:46,727
[Mayor] Ah, you know, on occasion, you know,

482
00:28:46,727 --> 00:28:52,800
our police officers may run across someone and they try to, you know,

483
00:28:52,800 --> 00:28:56,971
take the person to an area where the individual can get some shelter

484
00:28:56,971 --> 00:28:59,687
and get something to eat. But it’s not a problem here.

485
00:29:01,976 --> 00:29:04,545
This is Rodeo Drive in Beverly Hills,

486
00:29:04,545 --> 00:29:08,182
probably the world’s most famous upscale shopping district.

487
00:29:08,182 --> 00:29:11,118
It was here, for example, that Julia Roberts went shopping

488
00:29:11,118 --> 00:29:13,039
in Pretty Woman.

489
00:29:13,039 --> 00:29:15,890
Stimulus money has made its way here as well.

490
00:29:15,890 --> 00:29:20,461
These streets are to be repaved to the tune of 1 million dollars.

491
00:29:20,461 --> 00:29:22,861
Sure, there’re potholes in the asphalt

492
00:29:22,861 --> 00:29:26,667
but is this really the economy that needs to be stimulated?

493
00:29:30,104 --> 00:29:34,975
We had a $787 billion stimulus bill

494
00:29:34,975 --> 00:29:39,113
but only about one third of it was truly stimulus.

495
00:29:39,113 --> 00:29:43,117
By that I mean timely, targeted and temporary.

496
00:29:43,117 --> 00:29:46,353
The other two thirds were things that people wanted to do,

497
00:29:46,353 --> 00:29:48,789
have been wanting to do for a long time

498
00:29:48,789 --> 00:29:50,758
but they didn’t want to have to pay for it.

499
00:29:50,758 --> 00:29:53,761
They wanted to do it as a part of emergency legislation

500
00:29:53,761 --> 00:29:56,063
and charge it to the national credit card.

501
00:30:00,301 --> 00:30:04,872
The Johnstown, Pennsylvania airport has three scheduled flights a day.

502
00:30:04,872 --> 00:30:07,608
Other than that, it’s quite empty.

503
00:30:07,608 --> 00:30:11,879
When we have the flights coming, that’s when the people are here.

504
00:30:11,879 --> 00:30:13,759
Other than that, it’s empty.

505
00:30:13,759 --> 00:30:15,950
But one face is everywhere.

506
00:30:15,950 --> 00:30:19,587
Congressman John Murtha, the airport’s name sake.

507
00:30:19,587 --> 00:30:21,538
He’s been called the King of Pork

508
00:30:21,538 --> 00:30:25,808
and has gotten 200 million dollars for Murtha Airport from Washington.

509
00:30:26,391 --> 00:30:29,781
Earlier this year, the airport got a new source of revenue,

510
00:30:29,781 --> 00:30:32,474
800,000 dollars from the stimulus package

511
00:30:32,474 --> 00:30:35,121
to repave this backup landing strip.

512
00:30:35,121 --> 00:30:39,173
The head of the airport insists that the landing strip is safe.

513
00:30:39,173 --> 00:30:43,200
So why does it need doing if its not a safety issue?

514
00:30:48,635 --> 00:30:50,586
Because of the steps we take,

515
00:30:50,586 --> 00:30:53,626
this plan is about to shift it to high gear.

516
00:30:54,905 --> 00:30:58,225
One of the biggest stimulus programmes was aimed at the auto industry:

517
00:30:58,225 --> 00:31:00,106
Cash for Clunkers.

518
00:31:00,106 --> 00:31:02,863
Turn in your old car and get cash toward a new one

519
00:31:02,863 --> 00:31:04,169
from the government.

520
00:31:04,169 --> 00:31:08,536
It was so popular that its one billion dollar budget ran out in a week.

521
00:31:08,536 --> 00:31:11,621
So more money was quickly injected.

522
00:31:13,474 --> 00:31:15,803
Many countries offered similar programmes.

523
00:31:15,803 --> 00:31:19,657
Germany had the biggest one and handed out almost 7 billion dollars

524
00:31:19,657 --> 00:31:22,258
to those who scrapped any car more than 9 years old

525
00:31:22,258 --> 00:31:24,624
while buying a new one.

526
00:31:28,422 --> 00:31:32,923
Our government seem to think that German auto industry is so important

527
00:31:32,923 --> 00:31:35,284
we have to support it in some ways

528
00:31:35,284 --> 00:31:37,769
and therefore they created this bonus.

529
00:31:37,769 --> 00:31:39,466
They didn’t call it a scrapping bonus,

530
00:31:39,466 --> 00:31:42,575
because I think they knew just how ridiculous that was,

531
00:31:42,575 --> 00:31:45,826
so they called it an environment bonus.

532
00:31:45,826 --> 00:31:50,259
Karen Horn is a doctor of economics at a German Economics Institute.

533
00:31:51,278 --> 00:31:54,441
And of course, people took advantage of that.

534
00:31:54,441 --> 00:31:58,852
It worked as long as it was on, the programme worked.

535
00:31:58,852 --> 00:32:03,657
But now it’s out, it’s over and of course, numbers are dropping,

536
00:32:03,657 --> 00:32:08,512
people are feeling that they ran into additional debt due to that bonus

537
00:32:08,512 --> 00:32:10,631
that they wanted to take advantage of

538
00:32:10,631 --> 00:32:12,900
and they’re having problems they didn’t anticipate.

539
00:32:12,900 --> 00:32:17,872
So Germany spent almost 7 billion dollars to scrap fully functioning cars

540
00:32:17,872 --> 00:32:21,583
and to maintain excessive auto factory output.

541
00:32:22,444 --> 00:32:26,831
Once the programme ended, the industry was right back in the doldrums.

542
00:32:28,156 --> 00:32:34,007
I was just very surprised that people would accept the idea so readily,

543
00:32:34,007 --> 00:32:35,956
that they would accept the money is something else.

544
00:32:35,956 --> 00:32:36,790
Who wouldn’t.

545
00:32:36,790 --> 00:32:39,894
But, ehm, that they would find this a solution

546
00:32:39,894 --> 00:32:41,554
that they deemed viable.

547
00:32:41,554 --> 00:32:43,504
It doesn’t give me a very good impression

548
00:32:43,504 --> 00:32:48,435
of the rationality of the voter and taxpayer, I must say.

549
00:32:48,435 --> 00:32:49,611
And that’s where we are.

550
00:32:49,611 --> 00:32:53,380
I think at this point, the problem is now so big

551
00:32:53,380 --> 00:32:56,477
that government stimulus is not going to, you know,

552
00:32:56,477 --> 00:32:59,155
buy us another five or six years of phoney growth

553
00:32:59,155 --> 00:33:01,012
like it did last time.

554
00:33:01,012 --> 00:33:04,170
Because we have to accumulate so much more debt now.

555
00:33:04,170 --> 00:33:06,687
’Cause the bigger the problem gets, the more we have to stimulate

556
00:33:06,687 --> 00:33:08,656
to get that short-term boost,

557
00:33:08,656 --> 00:33:12,393
but now, the bigger the bust, because now we have the bigger stimulus,

558
00:33:12,393 --> 00:33:14,461
you know, to get out the economy.

559
00:33:16,964 --> 00:33:21,268
About a year after the worst economic crisis in modern history,

560
00:33:21,268 --> 00:33:23,211
Lehman Brothers is gone.

561
00:33:23,211 --> 00:33:26,574
But apart from that, Wall Street looks much the same.

562
00:33:26,574 --> 00:33:29,677
Many banks are reporting record profits.

563
00:33:29,677 --> 00:33:32,379
The world’s stock markets have skyrocketed.

564
00:33:32,379 --> 00:33:36,517
The market is finally breathing a sigh of relief.

565
00:33:36,517 --> 00:33:38,861
But isn’t it somewhat uncomfortable?

566
00:33:38,861 --> 00:33:41,455
Haven’t we been here before?

567
00:33:41,455 --> 00:33:45,479
All the measures that we have taken to save the economy:

568
00:33:45,479 --> 00:33:46,894
The low interest rates,

569
00:33:46,894 --> 00:33:48,128
the massive debt,

570
00:33:48,128 --> 00:33:51,000
the safety net for the financial industry.

571
00:33:51,000 --> 00:33:56,470
These are the very things that led us into a crisis in the first place.

572
00:33:56,470 --> 00:34:00,409
We’ve been saved from the consequences of one burst bubble

573
00:34:00,409 --> 00:34:05,112
by inflating a hundred new ones, all over the world.

574
00:34:19,859 --> 00:34:24,564
[27 January 2010] One year ago I took office amid two wars,

575
00:34:24,564 --> 00:34:28,272
an economy rocked by a severe recession.

576
00:34:28,272 --> 00:34:32,900
A financial system on a verge of collapse and a government deeply in debt.

577
00:34:33,404 --> 00:34:35,543
Experts from across the political spectrum warned

578
00:34:35,543 --> 00:34:40,949
that if we did not act, we might face a second depression.

579
00:34:41,615 --> 00:34:42,748
So we acted.

580
00:34:43,250 --> 00:34:46,103
Immediately and aggressively.

581
00:34:46,919 --> 00:34:51,500
And one year later the worst of the storm has passed.

582
00:35:17,000 --> 00:35:18,869
There are positive signs.

583
00:35:18,869 --> 00:35:21,255
This is the Hampton’s outside New York,

584
00:35:21,255 --> 00:35:24,161
a classic playground for Manhattan’s elite.

585
00:35:25,893 --> 00:35:30,464
A house by the Atlantic like this one costs 30 million dollars.

586
00:35:31,338 --> 00:35:35,680
And a hotdog bun with lobster salad costs 18 dollars.

587
00:35:35,680 --> 00:35:38,405
Fast food Hampton style.

588
00:35:39,047 --> 00:35:41,694
The crisis has made its mark here too,

589
00:35:41,694 --> 00:35:43,947
there are fewer private jets at the airport.

590
00:35:43,947 --> 00:35:49,053
Instead the Porsches jostle the Mercedes on the turn pike to New York.

591
00:35:55,723 --> 00:36:01,128
New York City, Washington, D.C. and Los Angeles, California

592
00:36:01,128 --> 00:36:03,931
don’t represent the real world.

593
00:36:03,931 --> 00:36:06,967
They also don’t represent the real part of America,

594
00:36:06,967 --> 00:36:09,744
the so-called main street of America.

595
00:36:09,744 --> 00:36:11,438
My tax money go to Bevery Hill,

596
00:36:11,438 --> 00:36:13,541
well, there is a lot of money in Beverly Hill.

597
00:36:13,541 --> 00:36:16,477
I don’t think they needed my money down there.

598
00:36:16,477 --> 00:36:18,752
That’s a different world.

599
00:36:18,752 --> 00:36:23,165
It’s not a reality, you know, down there.

600
00:36:23,165 --> 00:36:26,587
If you ever visit Union and need a hair cut,

601
00:36:26,587 --> 00:36:30,571
you may well end up at Frank Petrilli’s barbershop.

602
00:36:38,299 --> 00:36:41,579
But unfortunately a lot of people lost their homes,

603
00:36:41,579 --> 00:36:44,644
because they lost their jobs.

604
00:36:44,644 --> 00:36:46,307
And it’s a…

605
00:36:46,307 --> 00:36:50,511
They now live under the line for that one time they were able to do it.

606
00:36:50,511 --> 00:36:54,348
And lot of the young people, specially educated,

607
00:36:54,348 --> 00:36:57,508
they try to move, go out of town,

608
00:36:57,508 --> 00:37:01,130
but I believe that no matter where you go, the situtation is the same a lot.

609
00:37:01,130 --> 00:37:02,456
Where are they gonna go? Detroit?

610
00:37:03,870 --> 00:37:05,075
Now listen son,

611
00:37:06,633 --> 00:37:08,662
I wasn’t going to tell you this

612
00:37:08,662 --> 00:37:12,740
but you’re the reason we came here all the way from Indiana.

613
00:37:12,740 --> 00:37:14,969
You’ve heard all the talkers.

614
00:37:14,969 --> 00:37:17,671
Now, I’m going to show you the doers.

615
00:37:22,176 --> 00:37:26,714
The US government has launched bailouts, stimulus packages and guarantees

616
00:37:26,714 --> 00:37:30,084
to the tune of 10,000 billion dollars.

617
00:37:30,084 --> 00:37:32,620
[Caught myself wondering for the hundredth time,

618
00:37:32,620 --> 00:37:36,772
how the hell I got here, what the hell I’m doing here.]

619
00:37:36,772 --> 00:37:39,721
That’s more than the total cost of the US government

620
00:37:39,721 --> 00:37:43,330
for World War I, World War II, the Korean War,

621
00:37:43,330 --> 00:37:47,616
the Vietnam War, the invasion of Iraq, the New Deal, the Marshall Plan

622
00:37:47,616 --> 00:37:49,603
and the Moon landing.

623
00:37:49,603 --> 00:37:52,748
[… one giant leap for mankind.]

624
00:37:52,748 --> 00:37:55,232
Bush almost wrecked up more US debt

625
00:37:55,232 --> 00:37:58,065
than all presidents before him combined,

626
00:37:58,065 --> 00:38:02,059
from George Washington to Bill Clinton.

627
00:38:02,059 --> 00:38:04,785
And Obama is almost creating greater debt

628
00:38:04,785 --> 00:38:07,388
than all presidents before him,

629
00:38:07,388 --> 00:38:10,991
including George W. Bush.

630
00:38:12,526 --> 00:38:16,943
But it’s not just the US that’s increasingly looking like a house of cards.

631
00:38:16,943 --> 00:38:20,519
During the crisis, many governments went deeply into debt.

632
00:38:20,519 --> 00:38:23,304
Estimates say that the average debt in the richest nations

633
00:38:23,304 --> 00:38:28,342
will exceed 100% by the year 2011.

634
00:38:29,443 --> 00:38:33,334
These are loans taken at currently low interest rates.

635
00:38:34,335 --> 00:38:37,168
Should the interest rate rise by 1%,

636
00:38:37,168 --> 00:38:42,089
the US interest payments will rise by 100 billion dollars per year.

637
00:38:42,089 --> 00:38:47,013
That’s more than the annual cost for the Vietnam War.

638
00:38:47,013 --> 00:38:49,219
[Sometimes it’s just an engine failure,

639
00:38:49,219 --> 00:38:51,518
other times it’s the deadly flak.]

640
00:38:51,518 --> 00:38:55,000
[If the pilot’s lucky, the flak kills him,

641
00:38:55,000 --> 00:38:59,064
but usually he isn’t and he burns to death as his plane spins in.]

642
00:38:59,064 --> 00:39:02,142
It sounds absurd to even think that the United States,

643
00:39:02,142 --> 00:39:05,412
the world’s economic superpower, might crash.

644
00:39:05,412 --> 00:39:09,783
After all, they get the highest ratings from the credit rating agencies.

645
00:39:09,783 --> 00:39:12,369
One of the lessons that we must learn

646
00:39:12,369 --> 00:39:14,807
from the mortgage-related subprime

647
00:39:14,807 --> 00:39:20,895
is you have to take credit ratings with a big grain of salt.

648
00:39:20,895 --> 00:39:25,633
Because as we saw with the mortgage-related securities,

649
00:39:25,633 --> 00:39:31,224
they went from AAA rating to junk bond pretty fast

650
00:39:31,224 --> 00:39:34,441
once people understood the true situation.

651
00:39:34,441 --> 00:39:38,027
Today, the United States is rated AAA

652
00:39:38,027 --> 00:39:41,626
but if it doesn’t start taking steps to put its financial health in order,

653
00:39:41,626 --> 00:39:44,505
that AAA rating will be lost.

654
00:39:44,505 --> 00:39:46,944
It’s only a matter of when and how quickly.

655
00:39:48,615 --> 00:39:53,494
In September 2008, the bankruptcy of one large investment bank

656
00:39:53,494 --> 00:39:56,023
brought the world economy to its knees.

657
00:39:56,023 --> 00:39:58,252
The fate of Lehman Brothers raised the question

658
00:39:58,252 --> 00:40:00,100
who was next in line.

659
00:40:00,100 --> 00:40:03,404
So everyone avoided doing business with banks.

660
00:40:03,404 --> 00:40:07,493
How would the world react if the next entity to declare bankruptcy

661
00:40:07,493 --> 00:40:08,956
is a nation?

662
00:40:08,956 --> 00:40:11,903
Who is next in line if that were to happen?

663
00:40:14,041 --> 00:40:17,638
Some houses of cards have already started falling.

664
00:40:18,198 --> 00:40:19,453
This is Iceland.

665
00:40:19,453 --> 00:40:22,934
Until recently one of the richest nations in the world.

666
00:40:22,934 --> 00:40:26,348
When the crisis hit, the Icelandic banks collapsed,

667
00:40:26,348 --> 00:40:28,362
the Icelandic stock market crashed,

668
00:40:28,362 --> 00:40:31,454
leaving the debt with a small population.

669
00:40:32,066 --> 00:40:37,468
For the first time in 50 years this peaceful country saw riots.

670
00:40:42,161 --> 00:40:43,229
This is Greece.

671
00:40:43,229 --> 00:40:45,546
Here, deficits have hit a record high,

672
00:40:45,546 --> 00:40:50,868
the national debt is approaching 135% of GDP.

673
00:40:50,868 --> 00:40:53,487
The market wants higher interest rates for Greek loans,

674
00:40:53,487 --> 00:40:56,190
increasing the pressure on its strained economy.

675
00:40:56,190 --> 00:41:01,153
It seems like the Greek government needs a bailout to avoid collapse.

676
00:41:03,330 --> 00:41:04,031
Italy,

677
00:41:04,031 --> 00:41:05,399
Spain, Portugal

678
00:41:05,399 --> 00:41:06,890
and Great Britain

679
00:41:06,890 --> 00:41:10,257
are other EU nations with similar problems.

680
00:41:10,257 --> 00:41:12,857
What about my country, Sweden?

681
00:41:12,857 --> 00:41:15,458
The country’s finances are fairly robust,

682
00:41:15,458 --> 00:41:19,580
our national debt and deficit are lower than that of most nations.

683
00:41:19,580 --> 00:41:23,469
But Sweden is highly dependent on the world economy.

684
00:41:23,469 --> 00:41:26,487
More than half of our prosperity is based on exports.

685
00:41:26,487 --> 00:41:30,876
When other countries crash, we get hit almost as hard.

686
00:41:30,876 --> 00:41:34,823
And Swedish hosing prices have risen during the crisis

687
00:41:34,823 --> 00:41:38,864
despite the recession and despite the rising unemployment

688
00:41:38,864 --> 00:41:43,204
but because of low interest rates and a government mortgage company,

689
00:41:43,204 --> 00:41:47,107
SBAB, making loans easier to get.

690
00:41:47,107 --> 00:41:51,495
Swedes have never carried more debt in relation to their income.

691
00:41:51,495 --> 00:41:55,000
Doesn’t all of this sound very familiar?

692
00:41:56,000 --> 00:41:57,765
We have new bubbles everywhere

693
00:41:57,765 --> 00:42:00,830
so I am pretty worried about what’s going to happen.

694
00:42:00,830 --> 00:42:04,708
If we don’t want bubbles to burst, then don’t blow them up in the first place

695
00:42:04,708 --> 00:42:06,308
because all bubbles burst.

696
00:42:06,821 --> 00:42:10,964
If enough things can go wrong, some of them probably will.

697
00:42:12,132 --> 00:42:15,991
The question is just which needle will burst this bubble.

698
00:42:16,704 --> 00:42:20,706
Will it be new credit losses as banks take on greater risks

699
00:42:20,706 --> 00:42:24,396
knowing that the government considers them too big to fail?

700
00:42:25,722 --> 00:42:31,130
Or falling stock prices as interest rates rise and the steroids wear off?

701
00:42:32,037 --> 00:42:35,544
Will it be the Chinese economy, overheating?

702
00:42:35,544 --> 00:42:39,605
Or will it be a collapse of confidence in the US dollar?

703
00:42:44,298 --> 00:42:47,301
If we lose the confidence of our foreign lenders,

704
00:42:47,301 --> 00:42:49,174
and we must not allow that to happen,

705
00:42:49,174 --> 00:42:50,838
but if that were to happen,

706
00:42:50,838 --> 00:42:53,374
then there will be a dramatic decline of the dollar,

707
00:42:53,374 --> 00:42:55,559
a dramatic increase in interest rates,

708
00:42:55,559 --> 00:42:58,578
significant fuelling of inflation,

709
00:42:58,578 --> 00:43:03,408
a very, very deep recession and possibly depression

710
00:43:03,408 --> 00:43:07,076
that would be felt around the world.

711
00:43:07,076 --> 00:43:10,722
We must not allow that to happen.

712
00:43:12,185 --> 00:43:13,926
When the next bubble bursts,

713
00:43:13,926 --> 00:43:17,222
you cannot use the same emergency measures.

714
00:43:17,898 --> 00:43:21,540
You can’t lower interest rates that are already at rock bottom.

715
00:43:25,838 --> 00:43:28,276
You can’t stimulate the economy with borrowed money

716
00:43:28,276 --> 00:43:32,106
if an excessive national debt is the cause of the crisis.

717
00:43:33,849 --> 00:43:36,283
The governments could save the banks,

718
00:43:36,283 --> 00:43:39,538
but who can save the governments?

719
00:43:41,000 --> 00:43:43,857
Ultimately, there’s gonna be a price all around the world

720
00:43:43,857 --> 00:43:45,296
to be paid for this.

721
00:43:45,296 --> 00:43:48,295
And the longer it continues, the bigger that price is gonna be.

722
00:43:49,801 --> 00:43:52,399
You know, this really is a moral question.

723
00:43:52,399 --> 00:43:56,403
I mean, I can give you plenty of big and bad numbers.

724
00:43:56,403 --> 00:43:59,205
You know, when you talk about tens of trillions of dollars,

725
00:43:59,205 --> 00:44:01,040
it’s just hard to imagine.

726
00:44:01,040 --> 00:44:03,444
But you have to put a face on it.

727
00:44:03,444 --> 00:44:07,448
And to me I put my children’s and my grandchildren’s face on it.

728
00:44:07,448 --> 00:44:09,983
It’s their future that we’re mortgaging.

729
00:44:10,560 --> 00:44:13,718
When we tell people that there’s going to be a bailout bubble

730
00:44:13,718 --> 00:44:17,191
and they see the world equity markets up 50 or 60%,

731
00:44:17,191 --> 00:44:20,103
they don’t want to believe it’s another bubble.

732
00:44:20,103 --> 00:44:22,634
They want to step right up back to that table

733
00:44:22,634 --> 00:44:26,907
and throw their dice and try to win their hand

734
00:44:26,907 --> 00:44:29,902
at the wheel of fortune that Wall Street’s spinning.

735
00:44:29,902 --> 00:44:33,607
So people still don’t want to believe that the worst is yet to come.

736
00:44:37,170 --> 00:44:41,210
It’s easy to think of these predictions as much too gloomy

737
00:44:41,210 --> 00:44:45,459
but that is exactly what people said the last time.

738
00:44:45,459 --> 00:44:49,825
When these experts predicted the 2008 financial crisis.

739
00:44:49,825 --> 00:44:52,632
They were laughed at in the media.

740
00:45:19,151 --> 00:45:22,325
We can do it. But we need to do it soon

741
00:45:22,325 --> 00:45:27,500
because the clock is ticking and time is not working in our favor.

742
00:45:34,569 --> 00:45:38,100
[Based on the book “Financial Fiasco” by Johan Norberg]