Crashed: How a Decade of Financial Crises Changed the World

Crashed was so good I had to listen to it twice! If you have any interest in the economy this is a must read/listen to book. The author describes how at the onset he intended to write a book about the 2008 financial crises but once he got started realized that book is simply not possible to write ecause we are still in the 2008 financial crises 10 year later. 

I both love and hate the Tulip Bulb Bubble story because it has so little to do with financial bubbles and modern economics it is a joke it is so often referenced, but like in most cases the allegory holds some wisdom. Here, imagine that in the 1600's the Dutch government had decided that the Tulip market was "too-big-to-fail", what would have happened? 

As it did happen, it was an economic disater for a lot of perople, especially the wealthy who had a lot of money tied up in these investment (mostly because they were backed by the Dutch government, just like Fannie May backing US mortages). Rich people saw that Tulip investments had government backing so essentially were "safe". But when the market began to fall, the Dutch changed their minds when they realized they could not cover all the "paper" debt. It was a big crash to say the least. 

But, what would have happened if instead the Dutch government had said “No” to the crash and decided that it was better to instead print enough new money to buy out ALL of the tulip bulb contracts that were vastly over priced (because they had initially decided to back them)? Because that is exactly what happened in 2008.

In 2008 the US government was running their own little Tulip Bulb bubble scam. The idea was they would use government institutions (Fannie May to buy up ALL the mortgages they could, then “back” them from defaulting. Just like when the Dutch did the same thing with Tulip bulbs, government backing sent prices sky high. Not only were they inflating the market, giving (yes GIVING) houses to people that would never be able to pay back the mortgage taken out, they were backing the bad mortgages with Fannie May!

Once the world saw there was being, essentially, unlimited debt being created and backed by the US government at greater that 5% interest, there was no question, and the world financial markets started to pile in. This is why the majority of the TARP bail out funds went to foreign banks, like Deuschea Bank, they were the ones holding most of the bad debt, and the US was on the hook for it.

The US had no choice but to print $Trillions and hand it out to German, China and Japan.

So, what would have happened to the Dutch had they decided to do what we did? Who know but I can bet it would have been a lot worse for everyone involved. The US bailed out FOREIGN banks at the expense of US tax payers. This was not a choice, but still, super messed up to think my grand-kids’ taxes will probably be going to pay for this bail out for decades to come. In 2018 the 2008 financial crises is not over my friends, it is just getting started.