2008 was arguably the worst crisis in the history of the modern world. Although the crisis was decades in the making, the action really started in 2008. Understanding financial crisis with Adam Tooze.
But the thing about 2008 is that the loudest and most pervasive narratives barely scratch the surface and this is doing a terrible disservice to an entire generation that lived a sheltered life through the crisis, including me.
Given that this is the Great Depression of this generation, it is almost a moral imperative that we know the true story of the excesses that almost destroyed the world as we know and no – I am not using the phrase lightly.
I’ve always been fascinated by the crisis – I cannot explain why. Probably has to do with my interest in finance and economics. Up until recently, my knowledge of the crisis was limited to the widespread facetious level of understanding. Big banks engaged in reckless lending practices, started manufacturing mortgage-backed securities, they ran out of good quality mortgages, they started issuing sub-prime (read shitty!) mortgages, they bundled them up, tranched them, and sold piles of quite literal shit AAA-rated gold to investors world over including banks, funds, investors, hedge funds and others.
This predictably imploded and ended badly. GDP down, central banks worried, financial taps opened, banks saved, GDP picks back, all good, sunshine and roses all over. But this doesn’t even begin to explain the true scope and depth for the crisis.
It’s not just me. A vast majority of my generation knows nothing but the Big Short, Inside Jobs version of the crisis and that is a travesty. If I hadn’t come across this talk by professor Adam Tooze, I’d have probably died with this facetious understanding. Boy am I thankful I did.
It all started with this talk of professor Tooze:
After listening to this episode, I was for the first time able to, with great difficulty and strain to a large extent comprehend the nature of the beast that is the 2008 financial crisis. And so began my descent into the rabbit hole.
What I learned from this presentation
- The housing crisis was just the tip of the iceberg.
- This was not just an American crisis.
- What worsened the crisis was not on the asset side of the big banks, but the liability side.
- Role of China’s role in pulling the world from the brink.
- What is widely reported about the actions of the central bankers doesn’t even scratch the surface of the scale of their intervention.
- The role the Federal Reserve as a lender of last resort not just in the US but across the world in saving commercial banks and stabilizing other central banks.
- What happened on October 13th, 2008.
- Understanding the political economy dimensions.
As I started exploring more podcast conversations involving professor Tooze, I happened upon this gem
This is a marathon 2-hour conversation gives you a sweeping view of an insane breadth of topics spanning finance, politics, economics, and geopolitics. I could write a series on this conversation alone but I’d rather not spoil it.
Professor Tooze explains:
- His motivation for writing the book
- How everyone was focussed on the wrong crisis
- The political and geopolitical dimensions underpinning the time periods in the run-up to the crisis and aftermath.
- Roles played by Bush and Obama.
- Understanding the bank recaps, TARP and more.
- Lifting the lid on the role played by wholesale markets, specifically ABCP and Repo markets.
- And more…
Then I landed on this video, which was again brilliant. Professor Tooze explains how 9/11 and the dot com crash set the stage for the 2008 crisis
Finally I’ve just purchased the book and I cannot begin to dive into it.
Finally I’d like to say, Thank you professor.