Friday Movie Night - The Greed Game & America's Bubble Addiction

 It's Friday Night! Party Time!   Time to relax, put your feet up on the couch, lay back, and watch some detailed videos on economic policy!


This weeks videos are an economics lecture on America's Bubble Economy and a BBC documentary on how the super rich use other people's money to ....create bubbles. (Scroll down to see both videos.)

First up is Super Rich: the Greed Game by BBC reporter Robert Peston. It's from March, 2008, thus amazingly prophetic.

is an examination of how remuneration practices at private equity, hedge funds and banking encouraged excessive risk-taking.

The first important point to grasp is that bankers, the private-equity partners, the hedge-fund managers were all using other people’s money for their deals.

Investment bankers invested the capital of the banks for which they worked. Hedge-fund and private-equity executives invested their backers’ funds.

And they topped this up – they “leveraged” their deals – by borrowing enormous sums.

In some cases, they put modest amounts of their own wealth at risk. But their personal exposure to these deals was usually paltry.

The structure of their remuneration represented – in many cases – a rigged bet for them: heads they won, tails everyone else lost.


Now onto something a little more in depth, Economist Thomas Palley, giving a talk at the (fabulous!) New America Foundation on America's Bubble Addiction

Does America have a flawed pattern of growth?

For over two decades, growth has depended on asset bubbles and rising indebtedness. Business cycle recoveries have been marked by jobless recoveries and stagnant wages for most Americans.

The only way to escape this defective pattern, argues Thomas Palley, is to correct the problems in the macro economy. Join Dr. Palley to discuss these issues and his new paper, "America's Exhausted Paradigm: Macroeconomic Causes of the Financial Crisis and Great Recession."

I think it's very important to study what these economists, such as Palley and Gomory are recommending as structural policies changes. Right now the crisis is waning and it appears we are back to business as usual...for the moment. This implies to me we must try to gain more public support than ever before for economic structural change, as the immediate financial danger has receded from the public consciousness.



Thanks Robert.

This was an excellent discussion.

New America Foundation

They are inviting some really great economists plus putting everything online. This is great for blogs because we can point to some of them (plus watch them).

Despite the Google connection, I'll have to check out more what they are really recommending in terms of policy, simply due to having so many very out of the box, good economists who get ignored of course when it comes to enacting anything.

I wish CSPAN would get it more together. They have often transcripts, which will go to the actual point in the video, i.e. search the word transcript, come up with the video clip, which you can mark, now this is awesome because who can sit there 4 hour hearings? But they don't put up every single hearing and we're interested in the hearings often which don't garner that much attention so a video with transcript or even a video isn't available.

Thomas Palley

The presentation was very good. He definitely reflects my understanding of our economic situation. I was a bit uncertain regarding his point about joint government/corporate reform. I'm not sure that I agree with a consolidation of government/corporate interests.

I agree that the economic problem has been misdiagnosed and therefore we have insufficient solutions.

A bit along this same vein was a David Brancaccio interview with Zanny Minton Beddoes of The Economist on Now. She discusses why the Obama solution is vastly insufficient. I do not agree with everything she says, but she has valid points.

One thing I hear and read currently is that if the economic decline had been worse, then might see true reform. Most of the policy changes we have seen are redecorating.

how do we turn

some of these ideas into actual pieces of legislation we can push to support?

Good question

Not so easy answer.

First, an agreement would have to be reached as to what policies we want enacted. Create a grass roots movement to educate people on why the reform is needed.

A charismatic spokesperson and great marketing.


A sexier solution is to convince everyone you know that the banks are inherently evil and they should withdraw all their money, 401's and other investments from the bankster's clutches.

on that score

I had to get a car loan at the height of the credit crunch and discovered credit unions. I couldn't believe the terms, rates I could get and was wondering why I didn't check them out in the past.

So, we could start a weekly post series called Consumer action of the week or something to that effect but from what I've seen real consumer action has been quite a failure, but who knows one could make it viral, esp. when there are plenty of better solutions available right at the moment.

Want to do a series like this?

That is a GREAT idea!

I switched from my TARP recipient to a CU with TARP 1. My tax dollars were all they were going to get from me.

I think you are really onto something. It will help empower those that feel like these issues are out of their control.

I think I can handle a weekly series. I am looking for an IRA that invests only in sustainable, productive investments right now, anyway. It may be a good place to start.

It would be a great addition to the site

Most of those "consumer actions" are really corporations paying some smuck to push their products with no objective info. So, here's my first one, I checked out local credit unions and found way better rates and very flexible terms. They let me to do a 5 yr. loan and also buy an out of state private party used car. That gave enormous flexibility because I get $$ in chunks due to self employed. Then, allowing me to buy from private parties in addition out of state let me expand my hunt area so I ended up finding a really good deal. Oh yeah, the rate was 5.75% which I'm fairly certain is pretty good, esp. considering during this time, Jan. you couldn't get financing, even with great credit. I originally called my regular bank and they said they were not doing car loans, PERIOD, as in zero.

Credit unions are being underutilized

Must studies show that CUs provide better value and services than a big money center bank (AKA TARP recipients).

Credit Unions operate similarly to the way

banks previously did in making sure that loans could be repaid.

Also, CU's are protected just like FDIC insured banks are.

I chose a CU because I wanted to make sure I was with an institution that would not eventually be gobbled up by a large conglomerate bank.

Some CU's have faced problems with CRE loans and (though I will have to search for it), there is a link where you can search CU's balance sheets to make sure that a chosen CU is healthy.

A great deal of information is available at NCUA


Yes, and some CUs like mine provide more

deposit insurance through private insurance.

As a member of a CU you maybe part "owner" of the CU. You actually can have a say in the direction of the CU. Boy, what a concept!

Yes, some CUs have not been immuned from the mortgage crisis but how they dealt with it and how the Fed/Treasury dealt with financial conglomerates was night and day. CUs took their lumps and actually all CUs paid a price through higher assessments from NCUA.

There has to be a two prong approach.

1) Education - we have to improve financial/economic literacy in this country. That is the main reason why I created If more people understood how the financial system and economic system operated they would not be happy and be more willing to change it.

2) Policy - craft policy that translate into legislative proposals. Take those proposals and promote them to public and generate a grassroots movement like Yellow Dog said. Find a like minded congressperson who could introduce the bill and get sponsors then use movement to get the legislation passed.

Sounds too easy. LOL. Seriously, I think education is key. There is big reason why we have high levels of financial/economic illiteracy in this country and it is not because of benign neglect.

Hey, looks nice!

I didn't know you had this site at all, so you might add it to a signature on EP.

Thank you.

Our motto is "Financial Information for the Rest of Us." The objective is to try provide information regarding personal finance and economics in a way that people understand. We are trying to eliminate the "Wall Street speak".

Studies have shown that financial illiteracy is widespread across the U.S. and in my opinion contributed to the financial crisis. Financial illiteracy has been linked to lack of retirement savings, poor retirement planning and very bad borrowing habits.

Increasing financial literacy has been a passion of mine for many years.

one of the points of EP

To put the focus on purely all things econ as well as give voice to people who are always shut out and try to form a bridge in deciphering economists, Academia, Congress, policy, legislation.

This is why I'm personally so intent on accuracy. There is so much misinformation out there it's critical to have blog posts where people research, cite and have credibility in posts, regardless of where that data takes someone.

We've had liberal beliefs on EP, so this isn't just a bunch of Republicans spewing economic fiction. It's a fundamental issue that folks have great difficulty seeing the big picture or considering something before judgment.

One of the things I notice, when you put a couple of numbers into the conversation, usually your audience becomes brain dead. It's seriously scary out there how people cannot deal with numbers. It's like they mean nothing to the public at large.

Yes. Yes. Yes.

I remember in college I took a political economic class and one of the first questions asked was there any "math" involved in the class and the professor almost lost it and regained his composure and said "yes" and at the next class meeting and for the rest of the semester there were quite a few empty seats.

"Financial Innovation" has brought an incredible amount of complexity to a system that was already lacking in knowledgeable participants.

Even worse

Some of the people teaching econ are pretty clueless frankly. I had microeconomics with some TA who was clearly more interested in retaining a Visa than teaching and he never made much sense at all and also acted like the class was stupid if they questioned the nonsensical lecture. So, of the people who could "do math" and I went to a very heavily front loaded STEM school, so people could "do math" still was a real turn off.

I won't name names but I see full professors writing economic fiction and ya gotta wonder if anyone who is interested in objectivity, really examining anything, if the minute they conclude something different from these professors if they are plain flunked out for going against that particular religion.

Excellent Rebel

You have a great site and a great cause!

Perhaps you should start with educating our Congressmen and Senators.
When Ron Paul begins to sound like the only one making any sense - something is askew.


You have a point about Congressmen and Senators. How many of them are financial/economical literate? These are the people who are setting policy for the rest of us and many of them may actually be pretty illiterate. It is sad that the standard for being elected to public office is so low.

Many Thanks for these two videos...

They were worth the watch and Thomas Palley is a treasure for getting to the heart plus the nuts and bolts of what has gone wrong. Charts & Figures.... Where has this guy been all my life!

Both videos are worth the watch, because you won't see any coverage like this about America's "Financial Implosion" anywhere else, particularly in our Mainstream Media.