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The Great Recession
| Content Provider | WatchKnowLearn |
|---|---|
| Description | There’s already been much discussion over what fueled the Great Recession of 2008. In this video, Tyler Cowen focuses on a central theme of the crisis: the failure of financial intermediaries. By 2008, the economy was in a very fragile state, with both homeowners and banks taking on greater leverage, many ending up “underwater.” Why did managers at financial institutions take on greater and greater risk? We’ll discuss a couple of key reasons, including the role of excess confidence and incentives. In addition to homeowners’ leverage and bank leverage, a third factor played a major role in tipping the scale toward crisis: securitization. Mortgage securities during this time were very hard to value, riskier than advertised, and filled to the brim with high risk loans. Cowen discusses several reasons this happened, including downright fraud, failure of credit rating agencies, and overconfidence in the American housing market. Finally, a fourth factor joins homeowners’ leverage, bank leverage, and securitization to inch the economy closer to the edge: the shadow banking system. On the whole, the shadow banking system is made up of investment banks and various other complex financial intermediaries, highly dependent on short term loans. When housing prices started to fall in 2007, it was the final nudge that pushed the economy over the cliff. There was a run on the shadow banking system. Financial intermediaries came crashing down. We faced a credit crunch, and many businesses stopped growing. Layoffs ensued, increasing unemployment. What could have been done to prevent all of this? You’ll have to watch the video to find out. |
| Language | English |
| Access Restriction | Open |
| Rights License | Educational Community License |
| Subject Keyword | k-12 homeschool homeschooling home school Recession parents educational videos k12 preK-12 Social Sciences Economics and Business Economics Social Studies Economics Concepts Macroeconomics |
| Content Type | Video |
| Educational Role | Student Teacher |
| Educational Use | Self Learning Lecture |
| Time Required | PT12M52S |
| Education Level | Class XI Class IX Class XII Class X |
| Pedagogy | Lecture cum Demonstration |
| Resource Type | Video Lecture |
| Subject | Inflation |
