Crashes and Crises: Lessons from a History of Financial Disasters 5012

Banks fail. Stocks plummet. Nations default. According to World Bank economist Gerard Caprio, we are now living in a “boom in busts.” From cryptocurrency to China’s shadow banks, we must ask: What will bring the next disaster? Professor Biography......Page 3 Table of Contents......Page 5 Disclaimer......Page 6 Course Scope......Page 7 Lecture 1 • Fintech, Crypto, and the Future of Disaster......Page 9 Financial Technology......Page 10 Cryptocurrencies and Initial Coin Offerings......Page 13 Electronic Money and Future Financial Crises......Page 16 Lecture 2 • The Con Men Charles Ponzi and Ivar Kreuger......Page 20 Charles Ponzi......Page 21 Ivar Kreuger......Page 24 Lecture 3 • A Boom in Busts......Page 30 Financial Stability and Innovation......Page 31 Financial Deregulation......Page 34 Financial Crises......Page 36 Financial Risk......Page 38 Lecture 4 • The Tulip Bubble......Page 40 Asset Price Bubbles......Page 41 The Tulip Bubble......Page 44 The Dutch Stock Market......Page 47 Lecture 5 • The South Sea Bubble......Page 50 The South Sea Company and Corporate Charters......Page 51 John Blunt and the Sword Blade Company......Page 53 Money Subscriptions......Page 56 The Bubble Act......Page 59 Lecture 6 • The Mississippi Bubble......Page 62 John Law’s General Bank......Page 63 The Rise of the Mississippi Company......Page 64 Law’s Big Mistake......Page 68 Lecture 7 • Holes in the Ground: Mining Stock Frauds......Page 71 Why Mining Stocks?......Page 72 George Graham Rice......Page 73 Herbert Hoover......Page 78 Lecture 8 • The Panic of 1907......Page 81 The American Banking System......Page 83 The Gold Standard......Page 85 J. P. Morgan and the Panic of 1907......Page 87 Lecture 9 • Hyperinflation in Germany and Zimbabwe......Page 93 Hyperinflation in Germany......Page 95 Hyperinflation in Zimbabwe......Page 101 Lecture 10 • The Crash of 1929......Page 105 Changes in the American Economy and Corporate Earnings Growth......Page 107 What Kept Stock Prices Rising?......Page 110 Overvaluation and Crash......Page 112 Lecture 11 • The Great Contraction of 1931–1933......Page 116 The Great Contraction......Page 117 The Building and Loan Association......Page 123 Lecture 12 • The Savings and Loan Crisis......Page 126 The Savings and Loan Association......Page 127 Acts of Congress......Page 130 Falling Interest Rates and Financial Crimes......Page 133 The Height of the Crisis......Page 134 Lecture 13 • The Crash of 1987......Page 137 Insurance against Losses......Page 138 Option Pricing......Page 139 Computerized Trading and the Crash......Page 141 Lecture 14 • Japan’s Lost Decade......Page 148 The Japanese Financial System......Page 149 The Bubble Economy......Page 150 The Bursting of the Bubble Economy......Page 154 Jusen and the Breakdown of the Convoy System......Page 156 The Lost Decade......Page 157 Lecture 15 • Bankers Trust Swaps......Page 160 Interest Rate Swaps......Page 161 The P&G and Bankers Trust Swap......Page 163 Lecture 16 • Asia, Greece, and Global Contagion......Page 168 The Thai Baht......Page 170 Changes in a Currency’s Value......Page 172 Thailand’s Currency Crisis......Page 174 Currency Crisis in Greece......Page 178 Lecture 17 • The Orange County, California, Bankruptcy......Page 180 The Orange County Investment Pool......Page 181 Repos: The Secret behind Citron’s Success......Page 183 Citron’s Investment Strategy......Page 185 A Devastating Surprise for Citron......Page 187 Lecture 18 • The Dotcom Bubble......Page 191 The Start of the Internet Stock Boom......Page 192 The Value of Intangible Assets......Page 194 The Dividend Discount Model......Page 196 Dotcoms: Destined to Fail......Page 198 Lecture 19 • Rogue Traders at SocGen and Barings......Page 202 Jérôme Kerviel......Page 204 Nick Leeson......Page 208 Lecture 20 • Unhedged! Long-Term Capital Management......Page 213 Arbitrage and Convergence Trades......Page 214 Meriwether’s Dream Team of Finance......Page 216 The Flight-to-Safety Trend......Page 220 The End of the Fund......Page 222 Lecture 21 • The London Whale and Value at Risk......Page 225 Value at Risk......Page 226 The Financial Markets Crisis of 2008......Page 228 The London Whale......Page 230 Lecture 22 • The Goldilocks Economy and Three Bads......Page 236 The Great Moderation......Page 237 Bad Monetary Policy......Page 239 Bad Private-Sector Behavior......Page 241 Bad Financial Regulation......Page 245 Lecture 23 • Subprime Debt and the Run on Wall Street......Page 247 Subprime Mortgages and Mortgage-Backed Securities......Page 248 Runs on Financial Institutions......Page 251 Downgrades and Distress......Page 255 Lecture 24 • China’s Shadow Banks......Page 259 Shadow Banking in China......Page 261 China’s Trust Companies......Page 262 China’s Rapid Credit Growth......Page 264 Bibliography......Page 268 Image Credits......Page 284 Professor Connel Fullenkamp of Duke University guides you through four centuries of economic disasters--from tulip mania in the 1600s to the Great Recession of 2007-2009. Each of his 24 lectures covers a notable incident of financial misfortune or folly that is worthy of a Hollywood thriller. You hear how Charles Ponzi conducted the moneymaking scam that bears his name; how mining companies in the Old West sprang up like internet startups, with a similar imbalance of winners and losers; how hyperinflation destroyed Germany's economy at the beginning of 1920s and how its resulting stock market crash nearly sank America's stock market. You also hear how the Great Depression deepened through a wave of bank panics; how in more recent times the U.S. savings and loan industry went belly-up; how Orange County in California went bankrupt; how Japan's hard-charging economy came to a screeching halt; how currency crises swept the globe; how subprime mortgages nearly sparked a second Great Depression, and much more. You also learn how technology has transformed stock trading, how cryptocurrencies work, and why we live in an era of financial instability. As well as entertaining you with riveting stories, Professor Fullenkamp inoculates you against the gullibility, overconfidence, and herd mentality that have lured many to financial ruin. You won't have any trouble staying awake through these stimulating lectures. And, armed with the knowledge of how to stay out of harm's way, you may even sleep better at night