American Meltdown: The Crisis Of 2008

Posted December 6, 2015

In 2008 the American Financial System failed. In this video, uploaded today, we take a look back at the systemic meltdown of the US financial sector and at the crisis measures the government adopted to reflate the system and keep the world from collapsing into a new Great Depression. It is an absolutely incredible story.

We look at it all, from the government-assisted rescue of Bear Stearns and Wachovia, to the bankruptcy of Lehman Brothers, IndyMac and Washington Mutual, to the nationalization of Fannie Mae, Freddie Mac and AIG, right through to the government’s capital injections (or multiple capital injections) into nearly all the rest.

We also review all the mindboggling steps taken by the government to hold the system together and, ultimately, to reflate it: the Fed’s alphabet soup of liquidity support programs, two stimulus packages, more than $8 trillion of new government debt, comprehensive debt guarantees for financial institutions and depositors by the FDIC, seven years of 0% interest rates and $3.6 trillion of fiat money creation by the Fed.

No less astonishing, we also see that these emergency measures proved to be unbelievably successful. Household sector net worth is $18 trillion (26%) higher now than the pre-crisis peak in 2007. The US stock market is at an all time high. And, even the government reaped a huge profit, more than $166 billion from its direct intervention, plus a half trillion dollars more handed over to the government by the Fed – thus far!

Of course, it is too early to close the book on this story and simply assume we now all live happily ever after. The government has managed to reflate the financial system and the economy. However, as I have written many times before, it is much easier to inflate a bubble than to keep it inflated.   We must now await the next chapter, in which the Fed attempts to lift interest rates above 0% without pricking the Wealth Bubble it has worked so hard to inflate. There may well be a very unhappy ending to this story yet. Time will tell.

Until then, I believe you will find this recap of the crisis of 2008 fascinating. This video is 42 minutes long and contains 60 (downloadable) charts.

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