CrashCourse - 2015-10-21
Today on Crash Course Economics, Adriene and Jacob talk about the 2008 financial crisis and the US Goverment's response to the troubles. So, all this starts with home mortgages, and the use of mortgages as an investment instrument. For years, it seemed like the US housing market would go up and up. Like a bubble or something. It turns out it was a bubble. But not the good kind. And the government response was...interesting. Anyway, why are you reading this? Watch the video! More Financial Crisis Resources: Financial Crisis Inquiry Report: http://www.gpo.gov/fdsys/pkg/GPO-FCIC/pdf/GPO-FCIC.pdf TAL: Giant Pool of Money: http://www.thisamericanlife.org/radio-archives/episode/355/the-giant-pool-of-money Timeline of the crisis: https://www.stlouisfed.org/financial-crisis/full-timeline http://www.economist.com/news/schoolsbrief/21584534-effects-financial-crisis-are-still-being-felt-five-years-article Crash Course is on Patreon! You can support us directly by signing up at http://www.patreon.com/crashcourse Thanks to the following Patrons for their generous monthly contributions that help keep Crash Course free for everyone forever: Fatima Iqbal, Penelope Flagg, Eugenia Karlson, Alex S, Jirat, Tim Curwick, Christy Huddleston, Eric Kitchen, Moritz Schmidt, Today I Found Out, Avi Yashchin, Chris Peters, Eric Knight, Jacob Ash, Simun Niclasen, Jan Schmid, Elliot Beter, Sandra Aft, SR Foxley, Ian Dundore, Daniel Baulig, Jason A Saslow, Robert Kunz, Jessica Wode, Steve Marshall, Anna-Ester Volozh, Christian, Caleb Weeks, Jeffrey Thompson, James Craver, and Markus Persson -- Want to find Crash Course elsewhere on the internet? Facebook - http://www.facebook.com/YouTubeCrashCourse Twitter - http://www.twitter.com/TheCrashCourse Tumblr - http://thecrashcourse.tumblr.com Support Crash Course on Patreon: http://patreon.com/crashcourse CC Kids: http://www.youtube.com/crashcoursekids
"And eventually, they just blaimed immigrants and poor people, and this time even teachers"
Margin Call is better
@Brent Clouda lmfao yea, totally holding Hillary accountable for anything. Swell job, looks like you're high off your propaganda.
You, my good fellow with a very political comment, have spelled "Blamed" wrong.
@Star teachers are useless propaganda machines
Greatest movie of all time
I was 9 years old in 2008, and my father worked for AIG. My recollection of it was that my dad and I were at a local restaurant and he was reading a newspaper (an actual paper, ye yungins) and he just told me "Nate, we have made a mistake."
idont haveaname maybe the bank that lended you the money wasn’t involved in the mortgage backed securities or gave out bad loans. Also maybe none of y’all were stock investors or worked for companies that were involved in the stock market.
I was 23 when it happened
I remember surfing the internet and a few months before the crash I saw something that stuck in my mind:
Someone had taken the Mr.Bubble (bubble bath) logo and changed it to "the Housing Bubble"
Who was that person? The internet has a great way of allowing fringe ideas to be seen
Turns out that guy was correct
Damn, you lived inside Margin Call
I was 11. I remember my pops gettin laid off and we had to move to a smaller house. Luckily it was just a smaller house and not the streets. We bounced back but times were rough
I was 8 in 2008, one of my happiest times and I literally had no idea that the world is in chaos lol
Who else is here because your business teacher didn't explain anything
Teachers in USA are people who couldn't hack it as science, engineering or math majors, and decided to get an education degree.
much agreed. i borrowed a business text book from a friend still in school and returned it one week later because it teaches nothing. The perfect school in my head would teach these things;
1,basic maths
2,how to read and write
3,self defense
4,how to pay taxes,loans, and that type of basic financial know how
5,critical thinking.
other stuff that could maybe be added is stuff like how to drive, job interviews, idk can add to the list but you get my point.
This is all one needs. especially if they don't plan on a college degree.
im here bc id rather watch a video than read 20 pages in a book. 🤣
This isn’t what happened, either.
@Reece Dreyer Something is very hard to teach, like critical thinking. It learns from life, from practice.
Thumbs up if you came to this after watching The Big Short
damn right, imma watch it again
2.1k like
Jessica Pineda (I know you’ve probably watched the movie by now, but I thought you and future readers of this thread deserved a better answer.). The Big Short, based on a book of the same name by Michael Lewis, looks at the financial crisis of 2008 by focusing on the guys who actually saw it coming and managed to profit from it by shorting the inflated housing market through credit default swaps. Sounds very dry, right? But it’s fascinating because the ones who foresaw the crash were by definition quirky individuals who were not tempted by the Kool-Aid that everyone else in the financial services industry was drinking. The characters are unforgettable.
One of the worst movies ever made
Hahahaha obviously
"Things got better..." no they didn't, they just got pushed down the road
They actually did get somewhat better thanks to legislation like Dodd-Frank. Too bad it's been gutted.
"Money Printing Press goes bbbrrrrrrr......."
“Put down your crossbows”
Yeah right, then you’ll attack me with your crossbow.
Lmao 🤣🤣
Who's ready for 2020: The Great Recession Electric Boogloo?
Oof
proud 2 say im the 420th like:)
Correct.
Hey
you didn't know ... corona
Anyone watched "The Big Short" ?
yep., next thing i wanna watch is this dude using a van hallen belt buckle or even pantera
Not yet haha
In my top 5 favorite movies
You should also check out Margin Call
It was a great film. I don't know how they managed to make me empathise with characters that benefit from the suffering of millions tho!!!
Did
Who's here just because they wanted to learn about the recession? I haven't watched the big short and I dont study buisness/economics.
Me
Ok
We never Recovered from the financial crisis. In fact, the Financial Crisis was the just the result of all the blood thirsty bankers/ investors. Along comes the bailout and POOF, the crisis is "gone". Turns out that this was just a band-aid, as banks have inflated Home prices to above 2008 levels (also student loans, car loans, etc). Not to mention the Fed Res injecting Trillions of Dollars into the system, causing inflation and hidden inflation. Since 2008, my pay has increased about %30 (plummeted for about 7-8years first) but bills and expenses had increased %70(ish), while the national debt has ballooned past $20 trillion. That means that one man hour of work today has a lower value then a man hour to prior 2008. You have to work harder for less!
Our money is dying. Better get that burn barrel ready...
@FaintAura no no don't say that , I'm already risking loads of money in stocks.
So true. Small part of it but even in canada you see everywhere "bad credit, no credit come buy a car or a house" this has been going on since 2010 heavily. It's all going to crash down soon enough.
The whole system is designed to grow, then fail, be reorganized and then repeat the cycle.
With every transformation, a new source is found, which will generate new profits for the people involved.
partlycurrent and that’s the scary part when they figure out the new source and it will be digital which is scary since we don’t actually own our money and the government could do whatever they want with it. we should go back to the gold currency after this crash but unfortunately we won’t because banks can’t rip us off. the dollar is about to go away so I guess convert it all to gold and silver.
@being gay is not normal converting back to gold and silver is useless :D
I wouldn't be so afraid of governments but more of alll the capitalist-minded people who will take their own well being before before everyone elses.
You cannot grow without needing more space. There is no more space.
And in the end, people will notice that you can't eat Bitcoins and that megabytes won't keep you warm. Imagine the internett being down for a day! The confusion, chaos and complete finacial meltdown!
"How an Economy Grows and Why It Crashes" is a must read.
CrashCourse can you do a speculation video on what will happen if the College Debt bubble popped? Cause you know we have a lot of student loan debt
Gumer Zambrano it will pop. All bubbles pop. And it’s already been securitized just like mortgages were, and that is why tuition prices are rising so much faster than the value of a degree.
You didn't survive it. Just put a bandaid on it.
Laurent Fournier oil won’t peak we are self sufficient
@Fahiem Ahmadi no the strongest its ever been was the 60s people could pay college and cars in 368 days. we work years for college and a car and homes are basically debt slavery if you haven't realized by tuition, transportation, medical, rent. We live basically in the 1930s or 40s economy has been bad since Reaganomics. Boomers didn't ruin this country its just propaganda and flaw of democracy under right wing/ centrist ideology and neo liberalism. We can't have "good things" because the political parties will counter themselves. This another reason why freedom of speech is dumb and oxymoron. Freedom of speech is not tolerance and leaves a platform for fascism
You sure?
You sure?
Fahiem Ahmadi this comment didn’t age well. All those gains over the three years and now it’s back to where it was at before and getting worse by the day
"Things got better". Lol, what the govt did was pushing back and postponing the crysis into another bigger and more dangerous crysis.
"The first law of economics is there is no free lunch. The first law of politics is to ignore this law."----Thomas Sowell
Of course there is no mention of fault in the Federal Reserve for keeping interest rates artificially low for as long as they did, which supplied the air for this bubble. Also no mention of Freddy or Fannie and their role in the secondary mortgage market (incentives for predatory lending, much?). I guess we just need more regulation...gag.
No mention of the commodities super cycle either. Without that 2008 couldn't have happened
The whole USA housing market will fail again. Housing costs are way too high and I will bet that the middle/lower class will rebel.
Jay Cee You are correct I bought a home in 2014 my first one for 120,000 now it is worth 190,000. I’m renting it out at the moment but another crash is on its way soon maybe in 2 or 4 years . I’m thinking of selling in 2019.
Gio Casanova did you sell your house?
@Gio Casanova why would you ever sell property? If not actually in the business of selling real estate?
@partlycurrent Umm to make a profit and find another home that will go up in value. With extra cash in my pocket. It's 60k for me. However these are hard times and I have to be careful.
@Gio Casanova have you sold the house yet ?
Wow! Great job skipping the fact that the federal government promised to back these sub prime mortgages, and that federal reserve artificially lowered the interest rates which sent false signals to borrowers.
"The fault lies not in the stars..." Woah! John Green out for a day and these people hung his principles upside down!? ROFL...
You forgot to mention how the US government subsidised these sub-prime loans in the first place
Good thing the Dodd Franck Act will help prevent this in the future.
...aaaaaaand it's gone
Dodd Frank didn't do much because these new regulatory agencies didn't do much. The banks likely just paid them off or offered them a revolving door.
I don't have a strong opinion on the act either way but if we're going to prevent this it's not going to be because of Dodd Frank.
Pegasi No, because it’s gone already. We’ll never really know if it could have worked when the time comes - and it WILL come. The enormous amounts of debt in the global economy right now makes that inevitable.
Bespoke tranche opportunity babyyyyy
"things got better" lol 😂 just wait for the next one
2019 economics be like: i still need qe, i feel so sick
2020's sharpening the axe
That acdc belt buckle needs to be melt down never to return
The Big Short was a great documentary of exactly who the players were and what happened (mostly behind the scenes), but this "Crash Course" was really good at giving an overview.
"Investors were desperate." This shill owes me a new monitor.
"History doesn't repeat itself, but it often rhymes"
- Mark Twain
"tHe mArKeT wiLL rEgULaTe iTsELf" 2008: am I a joke to you
@8:45 Perverse Incentive is what got Wells Fargo in trouble last year with signing people up for credit cards without their knowledge, HUUUGE lawsuit
Total cost of TARP was 2.2 trillion and was intentionally done by banks.
I can't wait for the Crash Course Economics episode of the impending "Student Loan Debt Bubble"!
Yesterday on the news 1 trillion dollars in student debt
@Caleb Gordon Yeah but what does that mean?
I mean If I told you US has 13.3 trillion dollars in housing debt. That doesn't tell you if housing is in a bubble.
@idontlikeyouyo What actually happens when you declare bankruptcy tho?
@Blue Fingers youll be like Michael Scott. "I. DECLARE. BANKRUPTCY!!!"
Blue Fingers China would buys USA, and declare it as People Republic of America
What a mess. I remember not being able to buy a car, but able buying a house with a ninja loan in 07 🤦♂️
7:19 emergency loans i.e. printing money from thin air.
You guys remind of Lily and Marshall from HIMYM
The 2008 GFC was the main reason I decided to study Economics and Law at University the same year.
And how did your life turn out ?
leonard u I’m a lawyer now. My life turned out pretty good lol
@Miss Alina Good to know
Main outtakes of this lesson
1) Default - when a debtor is unable to meet the legal obligation of debt repayment.
a. Traditionally it was pretty hard to get a mortgage if you had bad credit or didn't have a steady job. Lenders just didn't want to take the risk that you might "default" on your loan.
b. In 2000s investors in the US and abroad, looking for low-risk, high-return investments, started throwing money at the US housing market.
2). Mortgage back securities are created when large financial institution securitize mortgages.
a. Securitize - the process of taking an illiquid asset and transforming it into a security.
b. They gave a lot of mortgage backed-securities AAA-ratings - the best of the best. And back when mortgages only for borrowers with good credit, mortgage debt was a good investment.
3) Subprime mortgage - a loan granted to individuals with poor credit history.
a. The new lax lending requirements and low interest rates drove housing prices higher, which only made mortgage backed securities and CDOs seem like an even better investment.
b. As people stopped buying houses and paying mortgages, the big financial institutions stopped buying subprime mortgages and subprime lenders were getting stuck with bad loans. By 2007 some really big lenders had declared bankruptcy.
c. Credit default swaps were also turned into other securities - that essentially allowed traders to bet huge amounts of money on whether the value of mortgage securities would go up or down.
d. No one knew exactly how bad the balance sheets at some of these financial institutions really were - these complicated, unregulated assets made it hard to tell.
4) Perverse incentive - when a policy ends up having a negative effect, opposite of what is intended.
5) Moral hazard - when one person takes on more risk because someone else bears the burden of that risk.
a. Blaming the government: "The sentries were not at their posts, in no small part due to the widely accepted faith in the self-correcting nature of the markets, and the ability of financial institutions to effectively police themselves."
Brilliant Summery!!! Bravo!
Thank you so much! It helps me a lot.
I love the irony that just naturally comes from the phrase "the self-correcting nature of the markets".
Beautiful 👌
@Boris Z elaborate
No matter what financial terminology will always sound like another language to me. Thank you for making sense of this
8:44
Answer: nothing
And then they bailed out the banks when they should have helped the people.
From my inderstanding they helped the people by helping the Banks. If the Banks failed thousends of people would lose all their savings and the fallout would be worse.
they already gave the answer to that when they let Lehman fail. The government made it clear they don't care some times when they didn't bail out Lehman and other banks.
During the 2000s you could use stated income for someone with a 640 credit score. Deliver pizzas for 8 bucks an hour? No. You are actually a delivery specialist and you make 80k a year.
"things got better" - well things got postponed at least.
Failed to regulate? more like deliberately deregulated..
Joey those mortgages were a tiny tiny fraction of the total amount of money in play. The rush get the middle class to blame the poor for the problems the rich create for the middle class. Don’t believe it! If the poor had that kind of power and influence on politicians and global financial markets they’d be rich.
Robinson Kaspar read about this a while back, wasn’t this what encouraged a major increase to loans given out to less successful citizens which lead to the crisis or i got something wrong?
Happy14 Yes! Although the govt didn’t make it mandatory to make loans that could not possibly be repaid, they just failed to forbid the banks from screwing each other silly, selling garbage mortgage commodities back and forth like beanie babies.
@Joey The housing crash cannot be explained entirely on the government. Multiple countries saw the same trend in the housing market, and most of the subprime loans issued were not intended for the CRA goals, it was following the trend of the market by then.
They were too big to fail more like big enough for a bail
Damn, history always repeats itself
I learned more in this 11:24 video, than I did my entire semester of Economics.
Well said
Would you recommend books or texts to learn about these topics in detail?
Education
THANK YOU SO MUCH <3 THIS HAS HELPED ME IN CLASS. I LOVE IT. VERY MUCH APPRECIATED :)
Essentially Banks created a Ponzi scheme where they sold high risk mortgages knowing full well they were worthless.
“If its too big to fail, its to big”
I think the guy was speaking too fast. The lady took her time and spoke clear. Cheers.
That acdc belt buckle is dope.
i think is kool
It's tacky!
Found the boomer
@YEET Great music knows no age, zoomer
@ANTHONATOR Gaming its not the music its the majority of said crowd and now its tainted acdc they where my introduction to rock back in middle school 2007.
Jacob Clifford saved me in my Economics class with his youtube channel, awesome to see him on here!
Vinista - 2020-03-10
Who’s here during the great crash of 2020?
Annastashia LaStella - 2020-04-05
@peace leader New world order much? Wow. No thank you.
peace leader - 2020-04-05
@Annastashia LaStella why not..??
every thing evolve under the realms of time..and our specie of humanity social structure is no exception..😉🐅
Jim Ettamarna - 2020-04-05
David Santos -per Mark Twain, it rhymes
Bryan Feliciano - 2020-04-08
It's great! Cheap stocks are great
Anthony Quist - 2020-04-12
it's not a crash, the government is asking people to stop going out and performing their normal consumer spending. In 2008 it was a systemic failure. That is NOT and I repeat NOT what is happening right now. Were halting demand even though the supply is still there. Market factors are not at play here which is what entirely caused the 2008 recession or "Great Recession". Sources: My Undergraduate degree in Applied Statistics and Economics and my in-progress Masters of Business Administration or "MBA". and 8+ years in the financial services industry.