Financial Crises: 2007-2008 and History’s Lessons

Featuring Richard Sylla

In this second part of a two-part piece, Richard Sylla, Professor Emeritus of Economics at New York University, shares his idiosyncratic view about the factors that led to the credit crisis. He also provides a historian’s perspective about the potential pre-crisis signs that investors might want to look out for. And he discusses the extent to which history has or has not prepared us to deal with the next crisis. Filmed on March 12, 2018 in New York.

Published on
23 April, 2018
Topic
Technology, US Economy, Housing Market, Recession
Duration
25 minutes
Asset class
Equities
Rating
104

Comments

  • LN

    Lucy N.

    27 5 2018 23:27

    1       0

    If everything is great- Why did Trump get elected.

  • WG

    Wade G.

    9 5 2018 23:07

    2       0

    Well, that didn't stand up to Part 1, but maybe it was unrealistic to hope so. I can't help but wonder what a future Fed will learn after the present period completely unfolds. Perhaps enough to find other employment.

  • LV

    Luís V.

    26 4 2018 14:10

    3       0

    Can only imagine what would have been if James Grant did this interview with Sylla. It would have been priceless.

  • yd

    yon d.

    24 4 2018 20:23

    5       2

    Another good vid, RealVision.

    As another viewer intimated, Raoul and Grant are very intelligent, well spoken and great personalities! I'd like to see more of them, listen to their ideas and even cross-interview each other. Great people to watch and learn from.

    Thanks RealVision! Your the best!

  • KS

    Kathleen S.

    24 4 2018 19:08

    3       0

    This is all about the end of empire and at the end you see this out right plunder, it is disgusting. Bastiat wrote about this in "The Law" which was written in 1850, but could just as easily have been written yesterday - when outright fraud and theft are legalized the end can not be far off.

  • BP

    Besar P.

    24 4 2018 15:38

    0       0

    A nice dose of reality for long term investors. I particularly liked his comments that we might see higher short term rates due to expansive fiscal policy so late in this cycle. That was a good point

  • tW

    tgwtom W.

    24 4 2018 13:27

    2       0

    So he knew the bottom but now vague concerns but not calling (knowing) a top.

  • BM

    Bryan M.

    24 4 2018 00:26

    3       4

    I fell asleep after a couple of minutes. Did I miss anything???

  • SW

    Scott W.

    23 4 2018 23:42

    5       0

    Dr. Bob Murphy is an outstanding counterpoint candidate. What's interesting about Murphy are the aftermath predictions he made with fervor and regularity circa 2011, 12, 13 but with diminishing frequency as the "recovery" extended. He at one point conceded that much of his predicted consequences from QE and Fed action had not materialized and offered explanations for why, hinting that was perhaps early rather than wrong. And this is the crux of the matter. Does the Fed still have control? Did they ever really? Is Sylla wrong but late to Murphy's right but early?

    RV, perhaps we could queue a discussion between Raoul and Grant on this matter. Raoul seems he might hew to the "Fed-in-control" camp while Grant has long argued control was lost via runaway debt some time ago.

  • JM

    John M.

    23 4 2018 23:23

    3       2

    He thinks there will be another crisis? Not in our lifetime, according to Janet Yellen!
    Bernanke was the right man, in the right place, at the right time?

  • F

    Floyd .

    23 4 2018 22:46

    7       2

    Some of the criticisms of this video seem a little harsh. The major point is know history and the mistakes throughout history if not you will think this time is different and you will repeat them. Having a sense of where you are in a cycle is good advice.Having an understanding of human nature is good advice as well. This simple advice is ignored by novice as well as some of the greatest investors at their peril.

  • CW

    Casey W.

    23 4 2018 17:35

    5       0

    I’d agree with the consensus here. His version of “history” seems a bit peachy vs others on the same topic. I’d throw out a couple other PHD’s that could take on the counterpoint Dr. William Boyes, Dr. Robert (Bob) Murphy, Dr., and Dr. Thomas Woods to name a few.

  • MC

    Minum C.

    23 4 2018 16:46

    6       0

    Sylla mentions the economy runs on credit. Given his knowledge of economic history, it would have been good for him to reference data that shows the unmistakable decline in the marginal productivity of debt. Whereas credit expansion keeps economies "moving", it is the pace of movement that seems to be in terminal decline. The declining marginal productivity of debt over the past few decades is not something that can be turned around unless the quantity of debt is reduced and/or eliminated. Hence, it seems the monetary system will need a reset at some point, perhaps through a slow, steady, and almost manufactured process.

  • TE

    Tito E.

    23 4 2018 16:31

    12       2

    How does a beautiful forest or an ocean benefit from simplistic meddling? It does not. This is simply a story of extremely large and growing unintended consquences. The hubris of these people, to think they have such laplace-demon-style hiveminds as to do better than a natural system is astounding. I have no big qualifications, with all due respect; Benanke didn't learn anything and neither did you Professor.

  • SS

    Sam S.

    23 4 2018 14:45

    2       0

    Pretty sure we heard Janet Yellen say, she didn't really know why the 2007-2009 crisis even happened, as though it was more engineered than not. Also heard that Goldman Sacks has a long history of battles with Lehman Bros and Bear Sterns, buying lots of political influence to bring down their competitors, when the Fed could have saved these companies (they chose which ones to save or not) with a pretty small amount of capital compared to 4 Trillion that Bernanke "clicked" into the banks/investment houses. Cash Option exposure for LB was like $190 Million-----Ask Trader Vic. The truth in hiding in the bull-sh******t. Mr. is right about using your instincts to pay attention and protect yourself.

  • GM

    Greg M.

    23 4 2018 14:10

    7       0

    RTV - Lets see a debate between him and Robert Murphy (battle of NYU). Two views in economics that are opposed. I find this interview humorous that he can't comprehend a world without a central bank.

    He forgets to mention Basil II in relation to the banks buying mortgage backed securities. The ratings agencies gave these securities AAA and the banks needed to fill out their capital structure. I remember talking to people and they knew this stuff was junk but they didn't have a choice. By the way - the housing bubble started bubbling in the 1990s with Andrew Cuomo at HUD. The Federal Reserve and Greenspan dumped the gas with 1 percent interest rates.

    The fundamental disagreement I have with him is if you distort the price of money then you distort the entire capital structure of production.

  • PD

    Peter D.

    23 4 2018 12:55

    15       4

    Poor Sylla is getting foggy in the head.

    "The 1930s financial reforms gave us 70 years of financial stability."

    "Bernanke was the right man at the right time."

    Sylla seems to forget America's 1971 global gold default, which launched systemic exponential global credit creation, which continues to this day, and sits like a time bomb, ready to implode at any time.

    As for Bernanke, didn't "save" the system .... his work played a key role in brining it down.

    ******

    Sylla's work in updating Sydney Homer's classic book The History of Interest Rates, makes him an invaluable source.

    However this interview suggests that it may have been Homer that did the heavy lifting on that book.

  • JS

    John S.

    23 4 2018 11:21

    8       0

    Only towards the end did he even mention shadow banking. How about explicitly stating that the exponential growth in housing was an avenue for Eurodollar-based credit expansion? The housing bubble was Eurodollar financed!

    Here we are with a dysfunctional global monetary system 10 years post 2007/8 and economists still haven't figured it out the need to reform it into a stable, functioning system.

    To quote Jeff Snider - 'The technocracy doesn’t work because it isn’t technically competent'. The Fed seems to have learned little to nothing.