Revisiting the 2008 Financial Crisis

 May 15, 2016
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Bear StearnsMarkets in State of Collapse

The American taxpayers woke one morning in September, 2008, to learn the financial markets were in a state of collapse; a collapse which was to have world-wide repercussions in causing a financial crisis. Were Americans caught unaware? What does the average man in the street understand when it comes to financial markets? Most hear about the financial market on the news in the evening, where a short spot is dedicated to the day’s stock exchange movement, and if lucky, an analysis is given of where things are at, as it were. Ask the average man in the street what a collateral debt obligation is, or a credit default swap, and they’ll shake their head and give you a blank stare. Ask them about the derivatives market and how large it is, and again there is generally a blank response. Why might this be? Generally, families are too concerned with making ends meet, and Mums and Dads don’t have time on their hands, or the opportunity to learn about complex financial instruments, so when a financial tsunami began to build prior to 2008, the average American had no idea until the tsunami came ashore, and destroyed everything in its path.

AIGTaxpayers Slugged

It has been 7 years since it happened, and many reassurances have since been given that all is good, recovery is underway, financial checks and balances are now in place so that another crisis of the magnitude of the last one won’t happen again; it can’t the rhetoric goes, and why can’t it? The Federal Reserve had to slug the American taxpayer with a $700 billion bailout for the banks and insurance companies that were responsible for causing the disaster in the first place. Bailing out the banks was a one off for the Federal Reserve. Doing it twice in a row is not an option on the table. However, recovery has been patchy in real terms. Underlying economic data, that which measures the fundamentals in an economy, aren’t all a rosy glow. The Obama administration has put in place very weak controls of the financial institutions; almost meaningless ones, so the financial markets remain deregulated (a law was passed prior to 2008, making regulation of the markets an impossibility). Consequently, who can really say what might transpire down the road a bit? No-one in the financial industry, nor the media, is going to let on if there is another problem, just like they didn’t let on there was a massive problem back in 2008.

Subprime_mortgage_originations,_1996-2008Massive Greed

Booms, bubbles, and busts; that’s the way it has been for the last one hundred years or more, why should it change? There’s always a new ponzi scheme; dreamt up in the “hallowed” halls of the financial institutions that make up Wall St. There is massive greed in these places; there is massive denial in these places, and there is no accountability in these places, so why, or how, can there ever be any change? It takes personal responsibility to act with integrity, and personal responsibility was nowhere to be found, not even hiding in a closet, by those responsible for the 2008 crisis. Anyone, who had any level of responsibility for the crisis walked away scot free, often with their pockets bulging with a few million bucks or more, while tens of millions of Americans lost their job, their savings, and home. The way of the world!

Federal ReserveLack of Accountability

As the 2008 financial crisis hit and unfolded, millions of people around the world had difficulty understanding the principle causes of it, and the elements involved. They watched the news, and listened to what financial “gurus”, economists and the like, told them, and hoped for the best. The documentary which follows, titled Inside Job, gives a blow by blow account of how America reached the point it reached in the financial markets by September, 2008, the expanding bubble, the crisis of collapse in the financial sector, and the lack of accountability. Knowing the root causes of the crisis brings a deep understanding of how the financial markets work, and how investment banks, such as Goldman Sachs, and Lehman Brothers, were behaving. The role of Alan Greenspan, who was Chairman of the Federal Reserve prior to 2008 is also made very clear, as is Ben Bernanke’s role, who was the Fed’s chairman when the financial crisis hit. The documentary is both absorbing and enlightening:

Image Sources:

  • Tomb of the Lehman Brothers by FutureAtlasLicence
  • AIG headquarters on 175 Water Street New York City by AIG Corporate. Licence
  • Eccles Federal Reserve Board Building by AgnosticPreachersKid. Licence

 

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Written by Alziel

A being seeking and pursuing knowledge and truth

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