Adam Leeds, of Upenn, discusses the recent crisis in the financial system:
Media discussion of the financial crisis has been dominated by narrow finger pointing or generalized doomsaying. In his presentation, Adam will outline the so-called "shadow financial system" and the alphabet soup of financial instruments that tie it together. By the end, we will understand how rising default rates in an obscure part of the mortgage market could spread throughout the financial system, bringing the system overall first to a halt and then to collapse. Along the way, we will address such interconnected topics as securitization and derivatives, risk vs. uncertainty, liquidity vs. solvency, leverage and capital valuation, de-regulation and the global savings glut-- all in terms you can explain to your grandmother. There will be no numbers or math involved at all.
Finally, we will be able to understand the range of policy options already exercised and being considered, and how these technical problems manifest and disguise the real politics of winners vs. losers, Wall St. vs. Main Street. Time permitting, we will also address the larger macroeconomic imbalances in the advanced capitalist world system that have been growing since 1972, which provided the preconditions for the current crisis, and analogies with Japan's Lost Decade, the Scandinavian crash, and the Great Depression.
Adam Leeds' Lecture MP3:
Suggestions for further reading.
Suggestions for further reading:
Ashcraft, Adam B. and Schuermann, Til, Understanding the Securitization of Subprime Mortgage Credit (March 2008). Wharton Financial Institutions Center Working Paper No. 07-43; FRB of New York Staff Report, No. 318. Available at SSRN:
Brenner, Robert, The Economics of Global Turbulence, Verso Press: 2006.
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