Why The 2022 Nobel Prize For Economics Is Making People So Angry
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- Опубликовано: 15 июн 2024
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0:00 - 1:35 Economics Nobel Prize
1:36 - 2:55 Surfshark
2:56 - 4:19 Ben Bernanke
4:20 - 7:45 Great depression bank runs
7:46 - 9:00 2008 recession
9:01 - 13:11 Diamond Dybvig model
13:12 - 13:58 Importance of banks
13:59 - 15:07 Too big to fail?
15:08 EE merch store
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Am very early.
Well done you getting rid of that art investment scam as a sponsor
There was no "recovery" from 2008 financial crisis. Only more debt.
Ban the government, that's the solution. No more lockdowns, no more federal reserve, no more deficit spending, inflation, excessive taxes... government is the problem, and the solution is a guillotine.
Could you do a retrospective series on what a good financial move for everyday people would've been to prepare for the great depression or housing crash? For example, someone saving their money to buy ridiculously cheap real estate in 2008 would've been a good move... Any hints or things we could look for that we now know of looking back?
Well, the "Nobel Price in Economics" is not one of the five Nobel Prizes which were established by Alfred Nobel's will in 1895.
Instead, it was established in 1968 by Sweden's central bank, to commemorate the bank's 300th anniversary. Hence, it's an independent price which is simply dedicated to the same man. I think it's important to clarify that.
Yeah I think he should have at least mentioned the contention that a lot people have that the Nobel in Economics is not a “real” Nobel.
Economists be like: "Why don't we get that old very respected prize? Let's just create our own and call it the same!"
Yeb, it’s a Sveriges Riksbank Prize in Memory of Alfred Nobel. And fool others like its a real Nobel’s Prize.
I think it’s a totally unimportant distinction. Really. Are you here to make the case that everything went sideways when they expanded the franchise? If not, it’s not an important distinction that I can see. And if if you can make that case, then simply pointing out the difference is trivial. And, it’s trivia that’s not funny or helpful. It’s not important.
So, if it’s an important difference, then tell us why, or let it lie.
@@nunyabidness3075 It is a very important distinction as it is an attempt to masqerade as something it's not
You didn't mention that the Economics prize is not only funded by a bank but it was created by a bank and not part of Nobel's vision or really any part of the spirit of the prize.
As he was a chemist i would not have expected Nobel having a vision on economics. One can argue it not being part of the spirit of the Nobel Prize, but then one need to know which that would be to start with, so tell us, what is that spirit?
I am not a fan of banks and issurance companies and want to see them more strictly regulated and/or have state substitutes to their services, but still if there are people in the world investing their time to understanding how our economies work and therefor bringing our general understanding onto a higher level, i wouldn't see that as an issue, but see it worthy of a recognition ... say a Nobel Prize. I can get behind questioning if these particular economists would have earned such prize, but to therefor put the prize in itself into question i would see as a step too far as in the long run it is a tool to inspire people to find solutions for existing problems.
@@kinngrimm in general I can see why your argument makes sense, but in this case in particular it is the sole prize that is awarded by a bank with interests in the specific outcomes of the research. It is also the sole prize that is not part of the original set. It exists to launder the reputation of economics as a field and the specific outcomes desired by the awarding bank, that's why there is a consistent neoliberal bent to the awards that are often controversial. Economics as a field does not have a culture of rigor or peer review and is a loose philosophy presented as science, while a sole doctrine within that philosophy is allowed to compete for this prize.
@@gameworkerty exactly
@@kinngrimm Why is it the only social science represented then? Why is it the only price that was added? Simple, because it's created deliberately to legitimize and push forward one specific economic ideology. You can see a very clear correlation between the Riksbank prize in economics and policies enacted the following years. Which is to say, the economic policies of figures such as Ronald Reagan and Margret Thatcher. Which we know understand to be devestating in their impacts and hurting the countries to this day. Both socially but, curiously, also economically.
Heck, you can even see one specific group dominating the prize both on the committee and recipient side. The mont pelerine society. A Neoliberal collective. The entire point of the prize is lobbying. Take a bunch of money to get policies through that cut taxes and make the investment into the prize worth it.
The Nobel foundation delegitimized itself by going quite explicitly against the ideas of Alfred Nobel and against the wishes of his living relatives. Only because there's a big pile of money coming their way. Utilizing them as superficial PR stunt for harmful policies.
@@Elanduli I would argue that Literature and Peace aren't hard sciences either
Any company that is "too big to fail" is too big to be a single institution, a lesson that the US somehow managed to avoid learning in the GFC. Mismanaged or inefficient companies must be allowed to fail for the health of the overall economy.
being too big to fail does not mean the company is failing, and it also doesnt have to mean the company/leadership avoids all negative consequences. it just means the economic/social impact of that company failing will have such a big and drawn out effect that it must be prevented then whoever saved it (usually the govt) will determine the new restructuring and punishments
the same concept applies to the banks in the great depression, they werent individually 'too big to fail' but collectively they were and we saw the end result. of course the great depression was really set up by _______ to consolidate their banking power if you look in to it, but the concept of failing still applies here regardless of the catalyst and motive behind it all
Some banks did fail in the GFC and many were laid off. It’s missing the point to let them die because it made a mistake because the overall economy can be harmed more than it’s worth teaching the lesson. *Groups* of banks need to *sometimes* be bailed out when it’s going to choke the economy’s ability to finance itself for the same reasons you wouldn’t want a city to have all its grocery stores shut down at the same time.
It didn't avoid learning it. It purposefully ignored it because it makes a few people very rich.
@@johnsmith-fk7fw set up by who?
I'm from Michigan and even I thought it was stupid to bail out the big 3. And look what they did right after they got the bail out, offshored the rest of whatever jobs they could internationally.
Refusing to call Dybvig and Diamond "D&D" because they actually know how to write was a sick roast I didn't know I wanted to hear.
What is D&D a reference to in this context?
@@VullVull the writers of game of thrones
@@VullVullD. Benioff and D. B. Weiss, showrunners of the last season of the GoT among other things
I lol'd, and then did again when reading the way you put it so perfectly.
Dungeons and dragons??
Banks are extremely important
Nice
Banks are the Biggest Scam.
Possibly
Wow
*extremely important to bankers
Hello from Sweden. The economics prize IS NOT A NOBEL PRIZE. Just wiki it. People are just calling it that because it sounds better, it's not awarded by the nobel comitte but just something the banks came up with and have Swedens Central bank award.
Yes it is so annoying, when people call it the Nobel prize of economics, because it is not that!
Just wait until after this next depression, the banks will award a prize for the Bail-In strategy.
Came to this comment section to point this out
Doesn't matter what its called. Sweden has lost its reputation as a neutral nation and anything Swedish is now US compromised.
I did wiki it and appearantly the Swedish Central Bank did sponsor the establishment of an award for Economics but put the Nobel Foundation in charge of it. So, it is awarded by the Nobel Foundation, and could be very well called a Nobel Prize, no?
ETA: The Nobel Org even lists it as one. So, it may not have been one of the original prizes, but it is treated as an equal. Counter question: Why consider all states of the united states which joined later on as states of the united states?
The moral hazard in bailing out banks is mentioned toward the end of the video but no mitigation of this hazard is observed or proposed. We are left with the banks are "too big to fail."
That's just the way the banks want it.
Federal Reserve = a.cartel of private banks living as rent seekers off the productive people in an economy.
The central problem with letting banks fail is not the bank, it's the fact that banks are run on your funds. Thus if banks fail, you are the one who loses money, not the bank. The whole idea of a bank run is, everyone with savings wants their money out, and the bank can't make all the payouts, so at some point it closes and everyone else is SOL. At which point, they turn to the government and demand a bailout or they start breaking things. So then you have the government still paying out all the money, but with a bunch of closed banks, businesses not getting loans, a bunch of debts going into the wild, usually to predatory lendors, and everything starts spiraling from there.
Thankfully, we're much smarter about these things now than we were in '29.
@@aaronwinegar9724 ideally the government would just move on to these too big to fail banks, bail them out, then make sure they turn into so small that a failure wouldn't be a problem anymore. Ie, split them up without actually destroying them and retaining their abilities but set them up as competition for each other. If they can't handle themselves at the big boys level, they can remain small league. The only issue is the owners and shareholders of the banks potentially getting somewhat shafted, but that's a sacrifice i'd be willing to make. If they push for ever higher profits until it breaks, then they can take the consequences. This will at least somewhat force the people in power to think twice before they try to balance on a knife's edge. Of course, some predatory shareholders will definitely be able to get out with little loss and most of the profits. There isn't really a great solution to that, but it increases the risk of too big to fail investments. No more will banks be invulnerable, no more will major air lines be safe-ish investments. Yet still, they would be safer for commoners who otherwise gets shafted every time there is a conflict, either by them actually failing which nulls their tickets and wipes their accounts or by having their tax money being spent to keep them lumbering along in full knowledge that repeating their mistakes is merely going to be a slap on their fingers before daddy fixes everything.
Tough the exact details on how that would work would need to be worked out by smarter people than me, but really, the rich are getting richer so they need more risks in their lives to counterbalance that.
@@blackfang101 So, there actually is an existing punishment on the books for banks that mess up like this. So, what the government does is temporarily nationalize the banks, take over administration, fire all of the people who so royally screwed up, then pass the bank charter on to someone else who will hopefully be more responsible with it. And the Brown and Obama administrations did a bit of that, which caused the conservatives to fall down on the floor and wail and cry and fill their diapers to overflowing about all of the "communism" going on. And the public sided with the diaper babies.
It was all very sad.
@@aaronwinegar9724 Amazing, but even doing that doesn't really fix the core issues. Sounds like they didn't touch the actual powers beyond the temporary nationalization and they still threw a fit?
Not an american so i don't really get too deeply into it, i just get the general feeling from the situation and it mostly just feels like nothing changed except for a temporary reprieve until they start balancing again.
My own country practices a bit of proper communism (tough its more often than not called socialism) and it works pretty well for the most part, but even so every few years a more right wing coalition gets in power and sells decades worth of asset accumulation for a temporary profit since they "believe in the free market" never to touch those industries again and squander it all on tax breaks for the rich that promptly gets out of dodge at the first sign of a government change back to someone that is likely to tax them more. Its a recurring theme in our country and quite a chunk of our extremely rich people just coincidentally moved out of the country at the same time as soon as there was talks of another tax increase.
Handling rich people with silk gloves in the hopes that they will do the right thing is such an unsteady and unreliable way to improve any economy, and even now that our current administration is left wing again they can't actually muster any ability to put on the brakes on the train that the last administration derailed completely. Our purchasing power is just disappearing like no tomorrow, but the country is getting richer, like a lot, and all it costs is the living standards of everyone in the country except the rich which got so much richer this last decade and especially this last year.
At least the right wing coalitions have all promised not to sell our most profitable revenue source relatively lately after decades of trying their best which is why they are rarely in power.
A thing i find worrisome is that the economic theory right now seems to be leaning towards, "whenever you have a crisis, throw a bunch of public funds to the rich". Basically incentivising the rich and powerful to kick over the economy. Since they will get bailed out and they can use the downfall of everything else to better their positions.
Or am I exaggerating?
absolutely correct, this is happening in every country on earth.
It's almost like rich people own the institutions which fund economic theorists to come up with theories which incentivise this behavior from governments or something.
Marx was right.
This is the problem. What really needs to happen is the executives that facilitated these conditions need to be stripped of their wealth and it be contributed back to saving the institution.
The bank then survives, lending it the required permanence, but the behaviour leading to the collapse is disincentivised by putting the onus on the entire executive team to call out when things are bad.
Too big to fail. Privatize profits, socialize losses. We now work for the betterment of multinational corporations (the 1%) who control all aspects of government, finance, media, etc. Humanity on the whole is pretty dumb and apathetic so there is little hope for the future.
Businesses love capitalism when it means they can suck up all the wealth for themselves, but when the flip side comes around and their mismanagement and risk taking causes them to collapse during a crises suddenly they believe in government hand outs.
"Ich habe keine Wirtschafts-Ausbildung und hasse sie von Herzen" - Alfred Nobel
Roughly "I have no economic education and I hate it [economics] with all my heart"
...Why did he say it in German?
@@RelativelyBest he learned German as a child, lived in Germany for a while and had German production facilities.
Economics is important we jus abuse it like other factors in life
@@ralphlotus I do not disagree with the importance of economics (hence my subscription to this channel) but it is certainly not a natural science and it absolutely should not be connected to a Nobel prize.
@@RelativelyBest Germany was a scientific powerhouse. There was a linguistic divide in Europe between scientists in German and French languages.
So what you're telling me is a group of central bankers gave another group of central bankers a boatload of money and prestige for saying that central banks and their client banks need more power and taxpayer money.
There's something that irks me about this idea, but I can't quite put my finger on it...
What you are saying can be applied to all human knowledge. Fritz Haber went from mustard gas to nitrogen production i.e. from chemicals that kill humans to those that help sustain billions of us...
well said! the hypocrisy is impressive! LOL
This is not an ill intended question. I honestly don't understand enough about economics. In which part or parts of the video is this said?
@@psicologiajoseh Check right after 2:54 (Central Bank gives the prize) and 8:45 (Central Banker pushes for bailouts, aka taxpayer money) and really the whole section about Bernanke.
@@eben3357 Haber made Zyklon, some other assholes made zyklon B. Haber had absolutely no input on how his work was modified.
Your post made it seem like it was intentional on his part, so I feel the need to clarify.
Today the difference between the rate for depositors and rates for lenders is quite wide. In the UK, loans have been doled out during Covid which are 80% guaranteed by the Government, so banks aren't bothered about repayment in full, or credit rating or security for these loans, while earning interest on the loans as they are being repaid. Being bailed out by the taxpayer (who guarantee the Government's lending and spending) just encourages reckless lending and speculation by banks using other people's money. Do I claim my prize now?
You'd probably have to share your prize with a lot of people. The idea of Moral Hazards isn't new.
Bruh this guy wrote a YT comment on moral hazard and thinks he's at the level of Ben Bernanke
@@---uf2zl
To be on the level of Bernanke, you gotta wreck the global economy, hand bailouts to the tune of tens of trillions, still have economies being kept alive with money printing and debt almost 15 years after the disaster, and get a job paying millions in "speaking fees" from the same banks you bailed out with public funds.
Only then can you win a Nobel prize in economics....
You got a long way to go kid.
@@mth469 Tbf, Bernanke technically wasn't the one actually responsible for wrecking the global economy.
The inflated housing bubble was already in full swing by the time he became chairman of the federal reserve, largely as a result of policies implemented by his predecessor, among numerous other factors, all of which Bernanke had virtually no actual role in causing.
He just happened to be appointed chairman at a time closing to the tipping point of this pre-existing crisis and was the one in charge of the monetary policy response when the inevitable crash finally came.
I mean sure, criticize him for the policy response, I myself had uncomfortable views about him bailing out large financial institutions that were tacitly unaccountable due to being 'Too big to fail', but the idea that he was the one responsible for the subprime mortgage crisis and wrecking of the global economy isn't reasonable at all.
Have a read about bail-ins. Doubt there will be bail-outs anymore
Bank deposits do not directly fund loans in the modern economy. In actuality, loans are one of the ways that new bank deposits (and new money) are *created*. The Bank of England had a very interesting bulletin that discussed this in detail a number of years ago. It's a topic that would make a great EE video!
Could you share a link to the bulletin?
Agreed, this is an important and often overlooked nuance
2nd this notion for a video on this topic
I agree that banks create money with loans
I'm pretty sure he did make a video on how loans create money, may have been How Money Works
"This year's Nobel prize is controversial."
"Tell me something new."
"It's the economics Nobel."
"huh..."
I have a related question you can maybe make a video to answer. So, I understand that $700billion bailout in the sense of "it props the banks up so they don't fail like they did in 1929" That I get. Here's what I don't get, they gave 700bil to the banks, but they didn't say "you have to forgive 700bil of debt so that people don't lose their houses." It seemed to me as a layperson that it was just "here's a 700bil gift from taxpayers, you can kick those taxpayers out of their houses now."
I'm open to you explaining that I'm wrong, I'm not a professional economist, but I have looked into the details to try and understand and I just don't get it. If the root problem was people defaulting on those mortgages, and the gov is going to give out 700bil anyway, why not save the banks AND the homeowners, what save the banks and throw the home owners under the bus?
because you're not a highly paid lobbyist, no dingo dollars for you I'm afraid.
Because the bailouts weren't a free gift, they were loans that the banks had to reimburse over time. The government made money by bailing out the banks.
This also means that the banks couldn't use the bailout to bailout individual homeowners, since they had to repay their debt.
Finally, why help the banks and not also homeowners? Because banks have a systemic role, if they fail the whole economy fails. That is not the case for homeowners, so no need to send billions in loans.
@@---uf2zl Paying off the loans saves the banks. The reason the banks were in financial trouble was because they lent more than would be paid back. Turning a profit is a good answer though.
This is a great thread
@@DeepakKumar-lv4te yeah we should blame everything on lobbyist instead of human greed. It’s not like you will accept any if you were elected.
I love the joke about not calling the nobel prices D&D, "because they actually know how to write. " 9:05
Google bad writers
😁
"Kick the can down the road" Economic Strategy. Brilliant. Revolutionary.
This. Keynesian policy is ALL based on increasing debt and encourage moving money around, within a closed system. Doesn't take a genius to see why central and private banks universally promote it.
If banks are going to be too big to fail then bankers can't be too big to jail.
Problem is you can't jail innocents without losing morality.
@@Noam_.Menashe Because the rich always have some way to preserve "innocence" in a net of connections and behind a bunch of lawyers, while normal people are extremely liable for anything they do...
If states cannot find ways to find the rich accountable for the vast damage they can cause, then people start looking for more and more extreme solutions. The state of law either has to facilitate a sensible solution or it will fall in a wave of populism.
They probably fund the private prisons and judges have portfolios with those banks.
I'm currently taking a macroeconomics class at my community college, and I just wanted to say thanks for making the class so easy!
In my macroeconomics class, i learned almost nothing new thanks to EE because I just knew them lol
In short. A waste of time!
You are now _even more_ ignorant about economics. Just like learning astrology makes somebody _even more_) ignorant about astronomy!
ruclips.net/video/iPkJH6BT7dM/видео.html
Lol me too good luck bro
Well it's supposed to be easy since it's part of a useless Business major
Banks should be allowed to fail, including criminal charges against every executive when that happens. And if they can't be allowed to fail they should be entirely nationalized to start with.
Somewhere in the world, people are fighting to make them pvt. They say that will make them more efficient. 😂
If it's mismanaged and they do illegal things that is reasonable. But why should someone be punished when the economy is against them and they can't do anything about it?
What? Nationalising them means they will never fail because government will always bail them out. Your opinion is oxymoronic. If you privatise the banking sector, banks that make too many stupid, or overly risky investments would be, and should be allowed to fail.
But allowing banks to fail puts the onus back on the customer to do a background check on the bank, which is one of the inefficiencies to be avoided as discussed in the video, right?
@@StetoGuy The bank failures in 2008 were the result of over-leveraging prompted by greed. They happened because banks, which are an administrative function, are run as businesses. A state owned bank would be run to channel investment rather then make obscene and unearned bonuses for its executives so it would not fail in the same way and therefore would not need bailing out.
Mora (by which I mean at least some) bankers should have gone to jail because of the 2008 crisis. The institutions might be too big to fail, but the people running them should be way more accountable, that IMO would help (not solve the problem, just help) banks from carelessly handing out credit and generating bubbles like the 2008 housing crisis.
People not going to jail for breaking the law I think is really the crux of what actually pisses people off about that time period, not so much the bailouts themselves.
What law did they break tho?
@@ajshaka3212 Manslaughter, at the very least. How many people literally died because they lost access to the necessities of life due to the crash? If we're willing to imprison a single worker for running someone over with a forklift, why not the people responsible for flattening the entire global economy?
@@ajshaka3212 They committed fraud. Labeling securities as higher quality than they actually were to get more investors and fuel more predatory home loans.
@@ajshaka3212 fraud in many ocasions
During the GFC, New Zealand guaranteed all bank deposits, which meant no bank runs. Finance firms didn't have these protections, and many of them went bankrupt and took years to repay all their depositors.
"[The] Nobel Prize confers on an individual an authority which in economics no man ought to possess. ... I'm not sure that it is desirable to strengthen the influence of a few individual economists by such a ceremonial and eye-catching recognition of achievements, perhaps of the distant past." - Friedrich A. von Hayek, 1794 Prize in Economic Sciences laureate, Speech at the Nobel Banquet, December 10, 1974.
Great observation by Hayek but in someway the great work of these economists has to be rewarded somehow
@@piusmotai1874 they sell books
God Austrian economics are dumb.
What year did he win? And just how old was he?
@@piusmotai1874 It is. They are all handsomely paid academics with tenure.
The most amusing part of this entire economic review of Nobel prizes papers....is the idea banks would actually give you interest on your savings account that isn't completely gobbled up by the fees they impose on that same account while lending it out at huge interest rates.
I believe the entire idea by D&D is simply a justification for banks to loan more cash in risker investments.
They only need to have 10% of the amount to give out a loan. The 90% they just type into a computer and every time a bank gives out a loan the money supply rises and money loses value. Our whole monetary system is nothing but a scam. The ones who loose are the ones actually doing the physical work for that money.
@@bigbud4sure Couldn't agree more. I'd go into crime but Wallstreet and big banks would still steal everything I made.
Time to go into politics or be an economist so I can justify the highway robbery of the working class.
All those papers which won that prize are basically showcase on how people will do anything to keep capitalism the only option- basically it's a bunch of coping and telling people "It's not system problem, it's people problem- they just don't trust us, it's their fault".
It's fkin disgusting
@@masterzoroark6664 you have a fundamental misunderstanding of society. Capitalism and socialism are both intrinsic to the idea of society. To have one without the other would be to have a glass of water without the glass/water.
@@sheeplord4976
But won't you agree that nowadays one is still way too prelevant to the point of harm and it refuses to step down to balance things out?
Question: You say there should be a system in place to prevent banks to take too many risks because they will always be bailed out because they are too big too fail. Was there such a system in 2008? And if yes, why did it fail? And what system do we have in 2022? And in your opinion is this system working or can we expect a crisis like in 2008 somewhere in the future?
As with many, many issues in society, we need to hold individual human beings personally accountable for their actions. When a bank messes up bad and needs a bailout, that's not the bank's fault. It is the fault of an individual, or individuals working at the bank. If a bank requires bailing out, we should bail it out to protect the economy, but the people responsible for creating the need for a bailout should be nailed to the wall. As a start, they should lose their jobs, and all of their assets should be forfeited towards the bailout. I don't believe in prison for non-violent offences, but if I did, I'd want 20 years to life. When someone drives a car irresponsibly and hurts someone, they sometimes go to prison. If someone drives a bank irresponsibly, they should suffer some consequences.
Bail out the banks, but arrest executives who have flouted regulations, and don't allow banks to lobby politicians. It is personal rather than corporate consequences that focus the minds of suits.
Personal responsibility is the only way. And by that I mean consfiscating assets and jail time. If they could track pacient zero during spanish flu, all noise around 2008 was just nonsense
The Glass steagall act was a good way to avoid financial actor to take too many risks and prevent bubles to explode, actually since the finance with the merging of liberalism we got way more vulnerable to crisis
@@user-pn4py6vr4n In EU they are working on leguslation requring the banks stock owners to take the punch when a bank is going bankrupt
Sounds more like it was controversial because a Bank awarded Bernanke and co. For making banks better at the expense of the common man, which is exemplified by how the economy 'recovered' after the GFC where like all the gains went to the banking and financial sectors because of quantitive easing.
This guy gets it
I saw the title and I couldn't form an opinion I kept wondering "which people" I was compelled to watch it, well played economics explained, well played.
Shut up
I also didn't get whos angry??
@@user-dd2nf3tv7k Twitter. But then that's nothing new.
Do you have any videos on mark to market accounting (MTM) and how it affected the Depression/GFC? I've seen a lot of people draw conclusions about the timing of rule changes and the bottom of the market. One of the main topics of this video was banks being scared to make loans. I can't imagine it would be easy to get a loan when your balance sheet just took a massive hit. Even if your cash flow situation is fine.
"How did this year´s Nobel price winners actually improve the way that we deal with financial crisis?" This question is stated incorrectly. It should be: "DID this year´s Nobel price winners actually improve the way that we deal with financial crisis?"
We avoided a 30 year depression, so yeah...?
@@Spectification Bit early for that one isn't it?
Well the answer is no. Nobody won a Nobel prize in economics. Not this year or any other year. There is no Nobel prize in economics.
@@Spectification The problem is the assumption that the winners improved the way we deal with financial crisis. That isn´t a given.
Yay! You showed my country's most renowned bank, Banco General, in the stock footage!
I know it's a small thing, but I love to see my little piece of land at least reflected in your channel, especially when you mostly talk about the largest economies in the world.
What country are you from?
@@mth469 Panamá
@@medicentio
From this day forth, you shall be known as "Panama Jack".
@@mth469 I am honored, kind fellow viewer
Banks have an incentive to make life unaffordable so that we need their access to capital. They also have a direct interest in lending the money that we entrust them with to corporations that make it difficult for us all to build or retain wealth. They haven’t failed us, we’ve failed ourselves by trusting such a flawed system
That’s a very interesting take. You could definitely see how the effect snowballed into the house market we have around the world today.
On point
blaming those who exist in a system under the threat of violence is victim blaming....
Banking is an inherently predatory system which tends towards the total destruction of the lands it inhabits. There is a reason bankers give their cousins and rabbis zero interest loans.
It's incentive @@rdln4313
Bernanke just kicked the ball down the road!
It's been 14 years. There's no evidence that the financial collapse of 2008 is still likely to cause a Great Depression II. There are still issues to be addressed in the economy (too-extreme economic inequality, widespread underemployment, serious labor issues, etc.), but addressing those issues is Congress' job. Meanwhile, Bernanke's actions prevented bank runs and bread lines, without using a world war.
Not really as there will always be the next depression or recession. Pretty much since the 18th century it's been this way just it's gotten bigger as the economy/population has grown.
@@Ushio01 Maybe we should take that as a sign that capitalism doesn't quite work right and at minimum needs some tweaking. And not in the direction for the rich.
@@Daniko2 Iffy.
It's less whether Bernanke's actions prevented bank runs; it's how they were implemented and who benefits (and probably a healthy dose of graft and corruption).
While the banks were saved, several who lost their life savings and will be working until they die. And that side of the equation has yet to be worked out.
@@Ursus5848 Or, it’s the tweaks causing the pain, and we need to dial them back a LOT. Right now, economists have to account for so many externalities in the US markets, their studies are mostly going to be wrong.
To use your chernoybl analogy, Bernanke beign put in charge in 2006 is like being brought in to stop the reactor explosion after the rods have been added back in
Don't mean to rain on your parade, but the thing is Bernanke was appointed to the Board of the US Fed in 2002, he became chairman in 2006
To use a Chernobyl analogy; BOOM! :D
I'd say that Bernanke still didn't do enough. The QE program should've been more aggressive. Or at least that's what I think the Fed should have done; Bernanke doesn't necessarily decide these things alone. At least the Fed did a better job than the ECB.
Perhaps banks can be treated like energy companies, if one fails the accounts are then offered up to a competitor on a like for like basis, and customers have all their money transferred to a new bank. It could mean they lose high interest payments they got from the previous bank, but that was probably unsustainable to begin with.
Energy is a more stable sector, where the assets stay valuable and consumers will still be there.
This is less the case for banking, where the assets (in this case loans) can drop in value and never recover. Who would buy a bank which has more debt than assets?
This was an excellent video. I, as a masters student in econ, was confused by the nobel prize winners. Because you are right, we do consider their discoveries as a given/known aspect of banking. I think we are just not used to old discoveries finally getting the recognition they deserved. Thanks so much for your work.
As people were living out of their cars, Ben Bernanke was saying the real problem WAS A SAVINGS GLUT and the economic crisis was largely due to people NOT SPENDING THEIR SAVINGS at the time. I believe he was saying things like "hoarding money". I mean THAT FAR OUT OF TOUCH and he gets a nobel prize!!! He had these figures that had ONLY remaining mortgages from BEFORE the GFC as people's ONLY loans, and then FROM THAT decided people must have been "hoarding money". No student loan debt, medical debt, car loans/leases, NONE OF THAT was included in the data. "Oh people must be saving too much". Yeah as everything is having a firesale and people are living in their cars....
Giving a man like that the prize shows that it's much more important to be popular, than it is to be a good economist.
Almost no one who is a good economist actually has an economics degree. The two concepts are antithetical.
Right. He basically argued that banks are indeed too big too fail. The banksters love the theory hence the Nobel prize. God forbid banks go under because their customers rightfully don't trust their fractional-reserve practices. When some banks fail, Bernanke suggests the remaining banks don't trust their new customers causing them to raise interest rates resulting in an economic depression. So instead of correcting the root problem just reward the problem.
@@benstallone6784 The prize is given out by the Swedish central bank. Private bankers love the theory, central bankers don't. They wouldn't be happy about his findings at all, yet they recognized its merit.
@@benstallone6784 well yeah bankers are too big to fail, they have your money and your neighbored and your family. Maybe you should study into this topic before commenting some dumb stuff?
Economics is a failed discipline where people make their reputation based on who they know and whose nonsense theories they can find excuses for, instead of how true their science is.
It's worth remembering that before 2007-2008 there were competing hypothesis as to what caused the great depression. We tend to forget just how ignorant we were of things just a couple of years after we are no longer ignorant of them. This is why people without historical training tend to be judgmental about the decisions that our predecessors made. Like you said, it's easy to fall into the trap to believe that we always knew what we know now. But at 53, I remember studying the various hypotheses for the causes of the great depression as a history major back in 2002. The one thing Ben Burnett you did well is that he immediately collapsed the question of the competing theories. Both he and Greenspan immediately understood which one was correct and what to do about it. And we can't really blame either one of getting us into the same situation that caused the great depression when we had no consensus about what caused the great depression at the time.
Really ?
I realized the housing market was unstable in 2006. I'm not an economist.
These idiots claimed to be the best of the best.
Greenspan's Randian Trickledown BS would could never work long term and it don't take a rocket scientist to figure it out.
Then in 2008 after deciding to print money they pretended they had no idea why inflation wasn't increasing. China and Saudi Arabia both had pinned their currencies to the US dollar and these geniuses couldn't figure out what would happen the second they stopped. Inflation - I saw that coming too. Smart guys like Paul Krugman said I was wrong... here we are.
Buy gold
Smol hats shortly after assuming control of the economy via private central bank. lol, it's so obvious and has been repeated so many times in History how is it even a question.
Keynes explained what went wrong to cause the Great Depression decades ago.....!
There are still competing explanations for the Great Depression. It’s not “settled science” as they say.
@@sydereal I think it's a lot more settled than it has ever been. In fact I think it's as settled as it ever will be.
Haven't even finished the video yet, but I just HAD to stop and comment because I loved your "out of left field" massive dig on the writers for GoT. Well placed, gave me a good laugh because I'm still bitter too.
Bernanke came into office in 2006. By that point, the housing bubble was almost at its peak. It's laughable to conclude he is somehow responsible. The main culprits were politicians and deregulation, and an SEC that was not properly regulating the mortgage backed securities and other derivatives. Bernanke was the one that came in and saved the system, and his timely appointment as Fed chair in 2006 coupled with your mentioned experience with bank panics was no accident.
Helping to re-stabilize a dysfunction system so that it can then continue to go on being dysfunctional and get more dysfunction isn't something to be lauded. Evidence of this will be when QE will continue to swell up after it's current short intermission.
While your phrase of "saved the system" is technically correct, he's literally reinforcing and keeping alive Frankenstein's monster which you so aptly described as the work of "politicians and deregulation." If he was as interested in saving the economy as he was in saving/maintaining his career he would have let the/some banks fail.
Could it be that he was appointed to Fed chair in 2006 because the "powers that be" knew a crash was coming and wanted him in place to prevent things from turning out worse than they did? I know the question comes across as a tin foil hat question, but the timing of Bernanke's appointment and the crash shouldn't be ignored either.
@@talinthon760 Anybody that worked in the real estate industry at the time knew it wasn't going to end well. The get rich quick bubble euphoria was all consuming. A musical chairs cash grab. Alan Greenspan spoke about "froth" in the housing market in 2005 and it fell on deaf ears.
@@kamilo4989 They did let a number of banks and institutions fail. See Lehman Brothers, Countrywide Mortgage, Bear Stearns, Wachovia, etc. And they reformed the financial system and brought back measures taken away through deregulation with Dodd-Frank.
@@steinravnik8692 I know the small banks were not rescued and some even prosecuted. But I'm talking about the big banks where the word "institution" is more apt; which are also the generator of the "too big to fail" mantra. From my understanding, at least some of the measures put in place had or are being removed. Furthermore, the larger issue for me is the financial norms that were set in place. Both the practical ones of endless QE to solve everyone's problems (which I'm confident will return in a few years because it's just too easy to use now); and, also the "psychological" impact (for a lack of a better word) that when you enable reckless behavior by taking away the consequences for those actions. The people involved and those aspiring to take their place will now act with further impunity, "invincibility" (in their corruptness), and recklessness.
I don't think many regular people care to much about rich people giving other rich people awards, same with the Emmy awards show that nobody watches anymore
You should care about the actual Nobel Prizes, in Physics, Chemistry, Physiology of Medicine, Peace, and Literature. As they tend to represent fundamental contributions to the world.
So much so that one even staged a violent assault to make itself relevant.
FDR's 2.5k banking insurance was pivotal in ending the bank runs. Perhaps it incentivises reckless loans but it is effective in mitigating a depression!
Trust you to know the historical example! You Putin video was one of my faves, neutral and simple
Your speaking cadence is pretty much if Economics Explained had a history channel
@@stevenarnold5151 It doesn't. And this propaganda without historic context is dangerous. People with historic knowledge have the tools to debate. Those without just bend over and take it.
Let's ignore the fact America's entry into WW2 was most likely responsible for ending the great depression. Some have argued with quantitative and qualitative evidence that FDR's progressive polices have lengthened the duration and increased the severity of the great depression.
@@Anonymous______________ false, the economic restrictions that were pulled back due to the end of the war freed up the markets allowing the economy to grow.
Good stuff. . I wonder if you have dealt with the Gaussian Copula function, and its (possibly mis-) application to the subprime mortgage market.
Banks don't require depositors to be able to make loans (though depositors are generally the cheapest source of funding, which is why banks prefer them). Ben Felix covers this in "Understanding the Fed's "Money Printer" (QE, the Stock Market, and Inflation)"
Hey M8 can you make a video of Peru's economy? I think it's a very interesting case of study. In particular, its relation between politically stability and economic stability. In Peru, all things consider the second doesn't make any sense, in comparison with rest of countries in the region. I think you'll find it very interesting. Cheers
The work from the prize winners did not show the world how important banks are. People found out how important banks were when banks closed their doors, people lost their life savings, businesses closed, and the economy collapsed.
"I want to call them D&D, but they actually know how to write." OH SNAP
I am here for this.
$960,000 dollars?!??!?? That’s almost enough for a studio without plumbing and a roof in San Francisco! Wow!!
Please share an example of data, used in your research, of which you could only obtain with a VPN.
There is also a difference between 'The Economy' and the stock market. Since the GFC, the Australian economy has not worked while the stock market went great. Why else did the LNP run up a "trillion dollar debt" to keep things going ( giving all that credit to their friends who dropped it into the stock market while not putting any into the businesses they ran ), Robodebt kept the government rolling in it.
The Nobel prize was also ment to be awarded to inventors, something that the Nobel Committee pretty much ignores. One of the few people that was awarded the Nobel prize for his inventions was Gustaf Dalén back in 1912. Prize motivation: “for his invention of automatic regulators for use in conjunction with gas accumulators for illuminating lighthouses and buoys”
Somebody should write a paper why savings and CD rates are still almost zero (Chase, BoA) while Fed increased the rates to 3+%.
The delay is so the banks can leverage the value before the common citizen ever gets a chance to purchase at value.
Plus banks don't like people to have checking/saving/CDs as that's money they have to pay FDIC insurance on.
My guess would be that it goes into maintaining basic banking infrastructure. I'm always baffled by how banks pay their employees, utilities, etc., when it doesn't appear that I'm funding this overhead with my modest account balances.
@@Madmoody21 That needs to be made into a T-shirt
Interesting. It is still way less than inflation, but just a couple of days ago you could get brokered CDs paying 4.85% from JPMorgan.
Would implementation of Fed coin have anything to do with this? As in, would banks and their roles in society be shifted to the Fed?
Bernanke's big contribution to the economy was decoupling the stock market from the real economy.
Line goes up on the stock market while the real economy stagnates and falls apart.
You're just watching devaluation of currency in real time when stock and real estate prices go up.
The way you described banks, deposits and investments you made it sound like NHS or other universal healthcare.
People put money in via tax, that tax is held by an institution which them appropriately distributes the cash. Point being that the tax is kinda like the deposit where withdrawal is the use of the service and it does rely that you will not need it (majority won't) but will be fully available when you do.
Hence the support from sin tax ext just like with the deposit bonuses/penalties.
These years I formulate the impression that central bank executives are just tentatively looking for solutions rather than taking useful approaches. I even suspect the study of macroeconomics is not as magical as many people think. It is just a summary of monetary history, also very U.S-U.K oriented.
Macroeconomics is US/UK focused because for the last three hundred years those two countries have provided the global reserve currencies.
"It should go without saying that if a group of people can ruin your life financially, professionally, and socially for merely pointing out their over representation in powerful positions - they are clearly not victims.
Quite the opposite.
They are oppressors - and they use their power and control to silence anyone who dares to notice. "
Y tf u commenting this under an economics vid
@@sebastiangoodbody8219 were talking about money, are you really surprised by the thinly veiled antisemitism?
@@talknight2 This guys just weird
The funny mustache man was kinda right, don't you think?
ok
I would like to point out that the banks where helped for self preservation, after TGD loads of social reforms where enforced by taxing the rich 93% income tax in order to create a pension fund, social security and basic health care, those things where set up after/ during a depression mind you
My grandfather told me he used to stand in line to get paid in cash when he was in the military. Before that he worked in a textile mill in a mill town where he got paid in mill credit that he could be use in the company stores or later exchange for cash. The mill owned our whole town.
Lots of people are angry because the paper, just like this video, explains how banks work completely wrong.
From Bank of England's publication: Money creation in the modern economy
"Money creation in practice differs from some popular misconceptions - banks do not act simply as intermediaries, lending out deposits that savers place with them, and nor do they ‘multiply up’ central bank money to create new loans and deposits"
...
"Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits."
For a simple explanation of how money and banks works, check out Positive Money.
Except the availability of debt to fund purchases like cars, homes and college is exactly why their prices inflate into asset bubbles that keep anyone who wants to live within their means, and wasn't born into wealth, out. You open the demand spigot with debt faster than you can open the supply spigot. Ubiquitous debt is social cancer.
We should distinguish between consumer debt, which is terrible, and investment debt, which is morally grey.
Ben Bernanke’s paper is definitely the best-written economics paper I’ve ever read, and inspired me to improve my technical writing. I haven’t read too many economics papers, only 50-75, as I’m not studying economics.
>I haven’t read too many economics papers
>only 50-75
bruh
Banks do NOT intermediate between savers and lenders. Banks create new money whenever they lend. They do need sufficient central bank reserves to cover withdrawals and other transactions, but they can borrow reserves without limit from the central bank.
Nice shot at Dan and Dave! Thank you.
Giving Bernanke a Nobel price for GFC is like giving Chernobyl operators a Noble price for their help in acute radiation sickness 🔥
Great job bro. Very informative video. You describe the fact so well. Thanks for sharing with us.
I remember we had a bank crisis many years ago, here in Norway, and the result was that the state took control over the bank. A bit more than just a bailout. I don't mind it, but if the bank has been mismanaged, I really think the guilty has to be held accountable. Too many got away with it in 2008.
This video makes me think about Ben Chifley, who spent his whole political career trying to nationalise Australian banks. Considering how much of the bank's function is that of a public good, should they remain mostly in private hands?
The man who said sub prime is contained just got a Nobel prize because sub prime… wasn’t contained? Absolutely not.
Sub prime was contained... The derivatives built on top of sub-prime... not so much.
@@TheCountess666 The pyramid scheme continues until it collapses.
He never got a Nobel prize. The video is fundamentally wrong. There is no Nobel prize in economics and never has been.
It’s important to try and hold it relative to what the rest of the country was thinking, which was an executive branch (bush) and many large financial firms that denied the risk of derivatives entirely. Bernanke was lambasted for taking contractionary policy at all in September of 08 as many wanted him to lower rates further, which would have rammed the economy into devastation
The problem is that the only lesson he learned was how to save the banks and stabilize "the system". But the system has been a slow boil of the frog - the consumers - for 40 years and the "recognition" only serves to specifically outline how we've entered a new gilded age and how he and his buddies were that gilded age's caretakers. The great depression was awful, but from it we got the 5 day work week and worker's rights and banking regulation and all sorts of other public "Goods". We need that reset once again, and preserving "the system" only keeps us all locked in it.
9:25 excellent Game of Thrones joke 🤣 I thought you were gonna go in another direction for a second.
Nice explanation of bank runs.
none of those reasons your vpn ad touts are actually accurate and true. you don't have to login to sites again, streaming providers tend to block VPNs and your general internet traffic is secure by default encrypted browser sessions. only thing you may have benefit with is seeing web sites like whatever country you're vpn is selected for vs whatever they show other countries, which is rarely a issue.
get better sponsors. I've also heard masterworks may be suspicious too.
There is field of modern economy that support the hypothesis that loans are not supported by desposit anymore. That bank just create the money in the first place when a loan is needed.
What are your opinions on that ?
That's not a field of economics, in the USA that's exactly what has happened since Biden got elected. Used to be a few years back that the bank needed to have 10% of money loaned out stored in savings from depositors. It was called fractional reserve banking. That was removed by Biden and now the banks have infinite money to lend out.
Sorry, I didnt really understood from your video, what was the role or insighta of Bernanke 🤷♂️ the Bale-out strategy?
I think the importance of banks to a diversified economy was well-understood prior to 2008, at least by the economists who had studied communities that limited banking. Example being religious communities that forbid usury, and how alternatives for lending have to be developed.
Can the government sue a bank for 'failing' and needing a bail out? No business is too big to avoid failure, but at the same time yes banks and access to debt that can confidently be paid, if banks operate with that in mind it's going to lead to problems.
If a business goes into bankruptcy then the bank can freeze their loans to make things easier or help them sell off what property they do have, at the same time everyone is told they're not doing well so it'll be harder to get loans without improvement and maybe start a trend of less business. If a bank declares bankruptcy on some loans, that means everyone is in trouble. Sort of meaning a fraction of everyone's property can't be paid for and can't take out more loans, their promise to pay back loans doesn't decrease but everyones confidence in holding their money with them or using them for loans, and you can't just say the factory owner has to settle for a smaller expansion to their business and not say we're in a recession. That's why we have procedures and insurance in case a bank goes under, if not contained it can ruin everyone's image of saving their money.
Not to say the government needs full control of banks but more stops and monitoring for something that is being seen as a public service. Like contracting a company to build roads, it can be done through the public and done well, but if someone under cuts their funds and delivers poor road quality for the next few months there needs to be consequences. You can spend more to make sure the workers have a living and do their job but the owner or financial manager should have something coming for causing problems for everyone who needs those roads.
Smartest comment I've seen so far!
"... and of course Economics"
Yea, that's why it isn't funded by Nobel, right?
But I mean, considering who the peace prize tends to go to it's hardly something serious anyway
Can there ever exist an outside agency that can correctly assess, ex-ante, whether the given investment proposal is likely to be riskier than the economy has appetite for, or should `natural rate of interest' take care of it?
Did you describe "fractional reserve banking"? Which banks actually do that?
Nobel Prizes are controversial generally speaking, but I can see how this particular prize made so many people angry.
For one it is not a Nobel Prize in the first place, have a look at Wiki.
Economists like Richard Werner or Thomas Sowell should be given the Nobel Prize.
It'll never happen. The Nobel prize is first and foremost a political prize for those who contribute to the global regime.
Love your content. I always learn something new!
Bank Run happens when people don't think they can get their money out from the banks. Instead of a huge bailout package, the government could just promise people that it will dole out the missing capital if and only if the bank does not have enough money. This could substantially decrease the bailout package if not eliminate it completely. As only those people that need to withdraw their money can; whereas others can be confident that the money is there (without needing to withdraw and confirm).
The US already has that with the FDIC, up to like $250,000 or something. That would eliminate the bailout entirely.
If noble is given in basis of bank's role in our economy than it should be given to Basel Committee.
Could you do a deep dive on the Glass-Steagall Act. Just surprised it wasn't mentioned in this video.
An excellent explanation of Nobel prize winners I wish the prize for physics was as well explained. I am always amused that people underestimate the power of reputation in economics I'm sure this has implications for cyber currency's.
The economic Nobel price is no Nobel price!
Yes! It is something riding the coattails of more reputable and meaning achievements/prizes.
I agree with the Nobelist's findings about banks being vital to a modern economy. They are. And they ARE too big to fail. They are essential. And that's exactly why they shouldn't be run privately. Banks should be inside of the public's ownership. Their profit motive is what caused the 2008 financial crash and it's what caused the FED to print so much money during covid, leading to our current inflation crisis.
You mean, like, state run banks?
Like banks but with the efficiency of the DMV and the agressiveness of the IRS? Banks that would have the deadly force of law as debt collection?
Yeah, I see no problem with that at all. /s
@@klosnj11 Yep that would be good for all.
Or we could just reign in a financial entity's speculative practices. Which we did after 2008. State run banks are not what we want. The Fed was created by Congress but acts independently. Which is a good thing
@@klosnj11 yes, they would be TO SLOW TO FAIL. that is good.
@@nishant54 Good for all who remain. The people who are too poor to pay back their loans and the people not quite rich enough to bribe their way out of trouble would all be dead or in prison.
Appreciated the simple, brief explanation of the purpose & usefulness of banks. Nothing or no one is perfect. I can understand the scepticism towards banks & the negative perception people have of them especially when times are tough & yet CEOs get paid millions. Yet they have been instrumental, directly & indirectly, in improving the lives of millions if not billions of people. I don’t know if I would want to live with any other potential alternatives considering the frailty of our world.
You will be the first RUclips Merch I’ll ever buy! I love your work
He was picked as chairman BECAUSE he wrote that paper
With the launch of EE merch store, we are one step closer to an EE Bank
I love the shade thrown at the GOT writers at 9:15
This was more like a puff piece about the ideas than an answer to the question of why this year's prize is making people so angry, which is left virtually untouched.
That D&D joke is brilliant
I honestly don't get it.
@@SapereAude1490 D&D are the two people who tanked Game of Thrones with their talentless writing ... especially of season 8.
Did the world actually recover from the sub prime crisis?
America and China certainly did
Glass-Steagall act sections were repelled. No way was that why...
I like big buffers and I can not lie.
Whether it's some kind of power storage for intermittent green energy, big chests in Factorio, or banks for money they all help stabilize things.
Bernanke's 40 year old research paper sounds exactly like the justification for the Federal Government to bail out existing insolvent banks; its literally the origin of the "too big to fail" concept. If anything this makes me question the appropriateness of his winning the Nobel prize even MORE, and makes me wonder at the coincidental timing of Bernanke's promotion to head of the Fed immediately before the 2008 recession.