Overdose (2010) - full transcript

We're in the midst of a
serious financial crisis, the

federal government is responding
with decisive action.

Have you taken a large
home loan? Or did you

put your savings in
stocks, mutual funds or

bonds? If not, then you
can relax, but all

of us that did are
living on borrowed time.

This is the story of
the greatest financial

crisis of our time. The
one that is on its way.

They spent hundreds of
billions of dollars

to show that they were
doing something but

not properly designed and not as
effective as it should have been.



When they start losing
money, hey we got to

get back in the game,
we got to get those

dice rolling again, hey
let's create another

bubble. You think the
dotcom bubble was too

big, we got a bigger one
for you. We'll call

it the real estate and
the credit crisis.

Well the problem is,
they never actually cure

the crisis, they just
give alcohol to a drunk.

It doesn't sober them
up, it just, you know

sets him up for a bigger
hangover. And that's

all we've done and
that's all we are trying

to do. And so I know
at some point you kill

the patient, at some point you
can't drink any more, it's

just the end of it. You reach
the end of the ability.



Congress wanted to
believe them. Congress

wanted an excuse to bail
out the auto workers.

And the executives gave
them just enough political

cover to say "ah well
I'm not really doing

this because I want auto
worker votes, and I'm

going to give them a
huge amount of money,

I'm really doing this
for the American economy...

So the solution is the
problem, and that's

why we had a problem
in the first place.

This is the danger in protecting
investors and consumers

from the consequences
of their own decisions.

We can do it. But we need
to do it soon, because the

clock is ticking and time is
not working in our favour.

I know many Americans
have questions tonight.

How did we reach this
point in our economy?

And what does this mean for
your financial future? These

are good questions and they
deserve clear answers.

They took down the symbols,
the financial symbols

of America, the twin
towers of the world trade

My old company where
I used to work,

the whole company is missing.

The story of the great
financial crisis begins

like many other stories
of our era, in the

United States, on September
eleventh two thousand

and one. The terrorists
knew exactly what

they doing-striking at
the ultimate symbol

of the global economy.
And they did it when

the US was already
slumping into a recession

after the dotcom
bubble had burst.

Despite the tragic
events of September the

eleventh the foundations
of our free society

remain sound and I'm
confident that we will

recover and prosper as we
have done in the past.

In spring two thousand
and one the Federal

Reserve started lowering
interest rates and

now it continued lowering
interest rates to save

companies on the brink
and to keep unemployment

down. During two thousand
and one the interest

rate was lowered from
six point five to one

point seventy five percent.
In two thousand and

three it was cut all
the way to one percent

and it remained there
for a full year.

Predicting the panic of
08, the economic nine

eleven and the current
economic crises that

we are still in was
probably one of the easiest

forecasts that we have
ever made in our thirty

years of trends forecasting.
It was very simple.

Gerald Celente lives in
Kingston, a few miles

North of New York. He's
one of the top trend

analysts in the US. He's
been called a modern

Nostradamus, he didn't
just predict the current

crisis, he also predicted
the dotcom bubble and

the stock market collapse
of nineteen eight seven.

Immediately after nine
eleven the president

of the united states
George W Bush told the

people to be good
Americans and go out and

shop. But how are they
going to do it, they

are in a recession. Federal
Reserve comes to the rescue.

In his memoir Federal Reserve
Chairman Alan Greenspan writes

that he knew that low interest
rates might cause a bubble.

It's party time.

Traditionally central
banks remove the punch

bowl once the party
starts. The interest rate

can't remain low for
too long or people

will do things that
they regret later.

This is one party that
just has to turn out right

Well the purpose of a party
is to have fun together.

And a successful party
needs planning and skill.

Greenspan argued that
the feds should never

remove the punch bowl. But
rather keep refilling

it, when the party started
to peter out. And

if things went bad, the
fed would clean up

the mess and tend to the
hangover. Banks and

speculators loved it,
now they could take

greater risks then ever
before. If they were

successful they could
keep the profits and

if they were unlucky,
Greenspan would rescue them.

Mama was that way. Let me
come home and cry over

something and she give
me candy every time.

When you see the stock
market come down and

the real estate bubble
burst, all that phoney

wealth is going to evaporate,
and all that is going to be

left is all the debt that we
accumulated to foreigners

Peter Schiff is another
analyst who was roundly

mocked when he predicted
crisis for the US

economy in the midst
of the boom. We

went on an unprecedented
global spending

binge. American citizens
borrowed and spent

trillions of dollars
to buy stuff. And that

is why we are in so much
trouble. It was because

we got drunk on all that
fed alcohol. Fed alcohol.

In a world that was
suddenly uncertain, with

a country under attack,
nothing felt safer

then investing in your own
home, in the American dream.

I do believe in the
American dream. I believe

there is such a thing
as the American dream.

Owning a home is a part
of that dream. Just

here. It's right here
in America if you own

you're own home then you are
realising the American dream.

Vernon Smith was awarded
the Nobel price in

economics in two thousand
and two. He received

it for his research in
experimental economics.

In his experiments he
puts economic theories

to the test. Smith is
an expert on bubbles.

If you are can buy a
home with almost nothing

down. Then you do well
if the prices continue

to go up. If it goes down,
well then you have an

incentive to walk away from
it and let the bank have it.

Low interest rates
caused a housing bubble.

Cheap loans encouraged
people to buy more

and bigger homes.
Housing prices began to

rise by ten percent a
year. So many took out

a second mortgage on their old
house to fund consumption.

You want to go on a
vacation? Buy some new

clothes? How about
putting an addition on

your house? You don't
have the money? How

about a home equity
loan... that's for you.

Let's use your house
as a piggy bank.

The banks granted loans
to almost anyone.

Why would you need a
decent income to buy

a home, if you can get
rich just living in it.

The market even coined
the term Nina loans.

No Income. No Assets. No problem.
You'll get a loan anyway.

The legislation was more
aggressively pushing

lenders to lend to
people with modest means

people whose incomes were eighty

percent of the median
income or below.

Politicians encouraged
this. For a long time both

the left and the right
have been encouraging

home ownership. So they've
created deductions,

subsidies and insurances,
and they created

two huge mortgage-financing
companies, Fannie

May and Freddie Mac.
Their job was to use

thousands of billions
of dollars to insure

loans for people who
couldn't get them on

the open market. They
were Government Sponsored

Enterprises. They had
private owners, but

they had been created
by congress, and their

transactions were guaranteed
by the government.

So particularly Fannie
May and Freddy Mac

are government sponsored
enterprises. And

what it means is...
they are private, not

now maybe. But they
are private companies

that have special charters
from the government. And

the thing about
government-sponsored enterprises

which is the main thing
people are talking about is

a sense that they are
guaranteed by the government.

First of all government
sponsored corporations

that help create our mortgage
system, I introduced

two of the leaders here
today. They call those

people Fannie May and
Freddy Mac, as well

as the federal home loan
banks will increase

their commitment to
minority markets by more

than four hundred and
forty billion dollars.

In the last decade Fannie
May and Freddy Mac

have donated more then
two hundred million

dollars to politicians in
Washington. Enterprise

Sponsored Government. I
asked the Former Freddie

Mac Chief Economist, what
they got for their money?

I don't know. I mean...
that's a tougher question.

You know they had a
pretty good charter. They

were regulated in a
spotty way. In many ways

the regulatory structure
wasn't that bad.

But it was the case that
the regulatory structure

was a compromise. It
wasn't a treasury, it

wasn't a housing really, it
was somewhere in between.

There was a huge moral
hazard courtesy of

the government in the
mortgage market. When

the government through
Fannie and Freddy started

to guarantee mortgages,
then the lenders were

no longer worried about
getting their money back

because the government
said "we guarantee it".

And so that's why I have
proposed and encouraged

the congress to fully
fund the American Dream

down payment fund. This will
use money, taxpayer's money,

to help a qualified low-income
buyer make a down payment.

Well greed has to be
balanced with a certain

amount of fear, and
that's what down payment

rules are all about and
amortisation rules

is to keep people from
get carried away by

as you say, the greed... of
expecting to become rich,

by buying a home and
reselling at higher price.

And that's important.
If one of the barriers

to home ownership is
the inability to make

a down payment, and if
one of the goals is

to increase home
ownership, it makes sense

to help people pay
that down payment.

This is the problem,
the moral hazard. We

gave a moral hazard to
homebuyers. Once you

say that you can buy a
home with no down payment,

all of a sudden there is
no risk to the borrower.

He doesn't care if he
over pays. Because if

the house keeps going
up he makes money, and

if it stops going up, the
bank loses the money.

We have moral hazards
in our banking system.

The US government guarantees
all bank deposits.

Well what does that
mean? That means that

the depositors don't
care what the banks do

with their money once
they deposit it, because

they know the government
guarantees it.

The federal government obviously
has to play an important

role. And we will, we will. When
I lay out a goal I mean it.

Why are they doing
that? Why can't we let

mortgages be financed
in the private sector?

The reason is because the
private sector would

not finance these crazy
mortgages and real

estate prices would
have to come down to

levels that people
actually can afford.

How can you promote home ownership
if people can't afford a home?

The big banks dared
to make riskier loans

because they had started
repackaging loans

and selling them to
others as securities.

They sold them to each
other, to Fannie May

and Freddy Mac, and they
sold them to Norway,

to Germany, and to China.
If the loans turned

bad, someone else would
end up with a hot potato.

I guess we are a little early.
What do you want to do?

Anything but inspect this
temple of capitalism.

Oh Nick.

Look at them, their eyes popping
out of their heads, drooling

over the very things that
are taking away their jobs.

Now Nick, don't get all
excited, my family

think that America is
a pretty swell place

and I don't want you to
disillusion them. I know

Everybody wanted to buy
because the rating agencies

that rate securities
gave the mortgage-backed

bonds their highest
rating. They promised

huge payoffs at near
zero risk. The rating

agencies thought that
house prices would just

keep rising and then
there was that minor

detail that the rating
agencies were being

paid by the sellers
of the securities.

I think the process was
corrupted. First of all

the government licences,
Moody's and Standard

& Poor's. So there are
only a few companies

authorised to rate these
bonds, so it wasn't

really a free market.
The government was in

bed with Moody's and
Standard & Poor's. But

also you had this perverse
relationship between

Wall Street and the
rating agencies where

they were paying the
rating agencies to rate

the products that they
were structuring. And

so there was, you know,
this was an incestuous

relationship where
they knew that if they

put bad ratings on them,
they wouldn't sell

and if they didn't
sell, they wouldn't be

making all this money
constantly rating them.

They were great days,
but it was all based

on a market on steroids.
Loans were cheap

enough to keep driving
housing prices up,

but when interest rates
returned to normal

levels in two thousand
and six, the spell

was broken. But for
one person the future

was still bright, Ben
Bernanke, Alan Greenspan's

successor as federal
research chairman.

Tell me, what is the worst, case
scenario if we in fact see

prices actually come down
substantially across the country?

Well I guess I don't buy
your premise. It's a

pretty unlikely
possibility; we have never

had a decline in house prices
on a nationwide basis.

People could no longer
get new loans to pay

off the old ones. Those
who had been given

a mortgage despite a
very low income couldn't

afford to stay. The
prices started falling

making the mortgage-backed
securities increasingly worthless.

There is not much
indication at this point

that subprime mortgage
issues have spread

into the broader mortgage market
which still seems to be healthy

The rating agencies removed
the higher ratings

from the securities.
Investors, who never

looked beyond the ratings,
suddenly didn't know what they

had brought. They didn't know
how risky those loans were.

Overall the US economy
appears likely to expand

at a moderate pace over
the second half of

two thousand and seven with
growth and strengthening

a bit in two thousand
and eight to a rate

close to the economy's
underline trend.

The dominoes started
falling. Investors stopped

buying mortgage-backed
securities and refused

to lend to those who
depended on them. Investment

banks like Bear Stearns
and Lehman Brothers

suddenly couldn't get new loans
to stay in business. Fannie

May and Freddy Mac could no
longer hide the disaster.

The financial crisis
started in a way that

is eerily similar to
today's situation. It

started with an economic
crisis in the U.S

and a government that
responded decisively.

After nine eleven and the
dotcom collapse the

US government decided
to save the economy

by inflating a new
bubble. Today the world

is trying to get out of
the financial crisis

by inflating a new
bubble. The difference

is that this bubble
is much bigger.

After they did the dot
COM bubble and that

burst and they re-inflated
it with the real

estate credit crisis
bubble and then that

burst. Now they have
created the bubble of

all bubbles and it's
not only in the United

States this is a global
bubble, they are all

in to it. It's called
the bail-out bubble.

Hey the economy is going
down, recession's

setting in, sales don't
look good, exports

soft, need more money?
How about we call it

stimulus packages. From
Australia to the United

States, from the UK to
China, they are dumping

funny money into the
system to keep it going.

In September of two
thousand and eight the

US economy is near
collapse. Fannie May and

Freddy Mac have been taken
over by the government.

On September 15th giant
investment bank, Lehman

brothers goes bankrupt
after monumental bets

on real estate. AIG
the largest insurance

company in the world
collapses the next day.

Fear sets in. It seems
like anyone can fail.

Suddenly, banks no
longer dare make

loans to companies or each other.

Experts warn that the economy
is about to collapse.

The CBS News, a special report,
a presidential address to the

nation. From CBS headquarters in
New York here is Katie Couric.

Good evening everyone.
President Bush asked

the Network for this
television time so that

he could speak directly
to you about a national

crisis. Some of this
country's major financial

institutions are in danger
of collapsing under

the weight of bad
mortgages, and that would

be devastating for
the entire economy.

We are in the midst of a serious
financial crisis. And the

federal government is responding
with decisive action.

In a televised speech Bush scares
the market even more whilst

still claiming that they can
trust him, he has a solution.

Under our proposal the
federal government

would put up to seven
hundred billion tax

payers dollar on the
line to purchase trouble

assets that are clogging
the financial system.

The US government wants
to spend huge amounts

on Wall Street banks to
cover their bad deals.

Even banks who don't
want the money will be

forced to take it, so
that the public won't

know which banks are on
the brink of collapse.

All in those in favour say yea.
Opposed say no. The ayes have it.

I want to thank the
secretary of treasure for

working hard with the
members. And thank

the members for working long hours
like they have been doing to

come up with this solution... and
that will solve the problem.

On October third Congress
approves the biggest financial

bailout in history. Seven
hundred billion dollars.

Around the world in Germany,
Italy, Canada, South Korea and

Great Britain, other politicians
do the same to save their banks.

We have taken the right,
the decisive, and the

tough decision that was
necessary to protect

the stability of the
financial system,

and to protect the depositors.

David Walker was US
Comptroller General from

nineteen ninety-eight
to two thousand and

eight. He quit because
he was so worried about

the US economy that
he wanted to have the

freedom to warn about
what might happen.

In my view the bail out
was necessary in certain

regards but in many cases
we wasted a lot of money.

Because we didn't do
three things. First have

clearly defined objectives
of what we were

trying to achieve.
Secondly, have criteria

established up front as
to who would get the

money and who wouldn't
get the money. And

number three, have
conditions established

up front as to what
they could and couldn't

do with the money. And
as a result of not

having those three things,
some people got the

money that didn't deserve
it, other people

got the money that
didn't make good use of

it, and as a result we
have a lot of waste

with regard to the
taxpayers money.

What would it mean if
the domestic industries

were allowed to fail
you heard senator...

As a result of the
crisis the situation for

the US Auto industry
becomes critical. On

November nineteenth their CEO's
fly to Washington to demand money.

The executives came out
and they said, "if

you. If you don't do
this we are going to

see a jobs holocaust".
They issued extremely

high estimates of how
many jobs would be lost,

including every single company
that supplies them with anything.

That's why this is about a lot
more than just Detroit. It's

about saving the US economy
from a catastrophic collapse

A month later President
Bush gives billions

of dollars to general
motors and Chrysler.

The money comes from the
bailout package that was

really only designed to save
the financial industry.

Now some US auto
executives say that their

companies are nearing
collapse. And that the

only way that they can
buy time to restructure

is with help from the
federal government.

Megan McArdle is a
financial analyst for the

Atlantic and has written
extensively about

the problems of the
US Auto industry.

Congress wanted an
excuse to bail out the

autoworkers. And the
executives gave them

just enough political
cover to say "ah well

I'm not really doing
this, because I want

auto worker votes, and
I'm going to give them

a huge amount of money...
I'm really doing

this for the economy".
But if you look at

how much money we gave
them, I mean we are

talking about almost a
hundred billion dollars,

is how much we will end
up spending on this.

You know even if you
were saving millions

of jobs it would have
been cheaper to give

everyone single one of
those a hundred thousand

dollars to go out an, you
know find a new job.

The big guys on Wall
Street, they can't take

their losses they are
crybaby capitalists.

Oh they preach Capitalism for
everybody but themselves.

The Federal Reserve has
cut its key interest

rate to the lowest level
on record. Ben Sherman,

Ben Bernanke and his
colleagues also pledge

to use all available
tools to contain the

widening crises and the longest
recession in a quarter century.

December sixteenth, two
thousand and eight,

it is time again to
pour alcohol into the

punch bowl. The Federal
Reserve reduces interest

rates to practically zero,
to restore investor

confidence. Other central
banks do the same.

Hey, have no credit?
Don't worry about

it, just sign on the dotted line.

The housing bubble which
they inflated blew up

with all the carnage and
all the bankruptcies,

and now that is their
solution, we'll just do

the same thing that we
did before. Instead

of having interest rates
at one percent, lets

have them at zero. And
let's buy everything

we can, let's print money
and buy mortgages.

Let us but credit card
dept, student loans,

let us buy bonds and
let's drop money from

helicopters to try to get
the same risk taking

excessive gambling on wall
street, let's convince

Americans who are already
loaded up on debt

to go out and buy more
stuff, to go out and

get deeper into dept.
And if the banks don't

want to lend them money
we'll make them lend

the money. This is economic
you know, suicide.

While the Fed lowers
interest rates, president

elect Barack Obama prepares
an enormous stimulus

package, meant to get
the US economy going.

We are running out of the
traditional ammunition

that's used in a recession,
which is to lower

interest rates, they're getting to
be about as low as they can go.

The American recovery
and reinvestment act

that I will sign today,
a plan that meets

the principals I laid out
in January is the most

sweeping economic recovery
package in our history.

On February seventh,
two thousand and nine

Obama approves a stimulus
package worth seven

hundred and eighty
seven billion dollars.

With a Bush stimulus
package from the year

before, US politician
have now spent close

to one trillion dollars
to stimulate the US

economy. The money is
spent on roads, airports,

education, unemployment
and other benefits.

There is bureaucracy
in everywhere. And in

Italy they used to say.
Where I'm from. When

you have a jar of honey,
you lick your fingers.

The town of Union is
located a few hours from

the Canadian border. This
is where the computer

company IBM got its start
and grew to be the

biggest in the world.
The factories are now

empty, but the town has
acquired a small town

rhythm, so they were
surprised when six hundred

thousand dollars from the stimulus

package arrived to
combat homelessness.

You know on occasion our
police officers may

run across someone and
they try to, you know

take the person to an area where
the individual can get some

shelter and get something to eat.
But it's not a problem here.

This is Rodeo Drive in
Beverley Hills; probably

the worlds most famous
upscale shopping district.

It was here for example
that Julia Roberts

went shopping in Pretty
Women. Stimulus money

has made its way here
as well. These streets

are to be repaved to the
tune of one million

dollars. Sure there are
potholes in the asphalt but is

this really the economy that
needs to be stimulated.

We had a seven hundred
and an eighty seven

billion dollar stimulus
bill. But only about

one third of it was
truly stimulus. By that

I mean timely, targeted
and temporary. The

other two thirds were
things that people wanted

to do, had been wanted
to do for a long time,

but they didn't want
to have to pay for it.

They wanted to do it
as a part of emergency

legislation and charge it to
the national credit card.

The Johnstown Pennsylvania
airport has three scheduled

flights a day. Other then
that it's quite empty.

When we have the flights
coming, that's when

people are here. Other
then that it's empty

But one face is everywhere;
Congressman John

Murtha, the airports
name sake. He's been

called the King of Pork
and has gotten two

hundred million dollars
for Murtha Airport

from Washington. Earlier
this year the airport

got a new source of
revenue, eight hundred

thousand dollars from
the stimulus package to

repave this backup
landing strip. The head

of the airport insists that
the landing strip is safe.

So why does it need doing
if its not a safety issue?

Because of the steps
we take this plan

is about to shift into high gear.

One of the biggest
stimulus programmes was

aimed at the auto industry,
cash for clunkers.

Turn in your old car and
get cash towards a new

one from the government.
It was so popular

that its one billion
dollar budget ran out in

a week; so more money
was quickly injected.

Many countries offered
similar programmes;

Germany had the biggest
one and handed out

almost seven billion dollars
to those that scrapped any

car more then nine years
old, while buying a new one.

Our government seems
to think that German

auto industry is so
important that we have

to support it in some
way. And therefore they

created this bonus.
They didn't call it a

scrapping bonus, because I
think I knew how ridiculous

that was. So they called
it an environment bonus.

Karen Horn is a
doctor of economics

at a German Economics Institute.

And of course people
took advantage of that,

it worked as long as
it was on, the program

worked. But now it's
out, it's over and of

course numbers are dropping,
people are feeling

that they ran into
additional debt due to

that bonus that they
wanted to take advantage

of and they are having problems
they didn't anticipate.

So Germany spent almost
seven billion dollars

to scrap fully functioning
cars and to maintain

excessive auto factory
output. Once the programme

ended the industry was right
back in the doldrums.

I was just very surprised
that the people

would accept the idea
so readily. That they

would accept the money
was something else,

who wouldn't? But that
they would find it

a solution that they deemed
viable, doesn't give

me a very good impression
of the rationality

of the voter and tax
payer I must say.

And that's where we are.
I think at this point,

the problem is now so
big that government

stimulus is not going to
you know buy us another

five or six years of
phoney growth like it

did last time. Because
we have to accumulate

so much more debt now.
The bigger the problem

gets the more we have
to stimulate to get

that short-term boost.
But now the bigger

the bust is now we have a bigger

stimulus-to get out
of the economy.

About a year after the
worst economic crisis

in history, Lehman Bothers
is gone, but apart

from that, Wall Street
looks much the same.

Many banks are reporting
record profits, the

world stock markets
have sky rocketed, the

market is finally breathing
a sigh of relief.

But isn't it somewhat
uncomfortable?

Haven't we been here before?

All the measures that we
have taken to save the

economy, the low interest
rates, the massive

debt, the safety net for
the financial industry,

these are the very
things that led us into

a crisis in the first
place. We've been saved

from the consequences
of one burst bubble,

by inflating a hundred new
ones all over the world.

One year ago I took
office amid two wars, and

an economy rocked by
a severe recession.

A financial system on
the verge of collapse

and a government deeply
in debt. Experts from

across the political
spectrum warned that if we

did not act we might face
a second depression.

So we acted. Immediately
and aggressively, and one

year later the worst of
the storm has passed.

There are positive signs.
This is the Hampton's

outside New York, a
classic playground for

Manhattan's elite. A
house by the Atlantic,

like this one, costs
thirty million dollars

and a hot dog bun with
lobster salad costs

eighteen dollars. Fast
food Hampton style.

The crisis has made its
mark here too, there

are fewer private jets
at the airport. Instead

the Porsches jostle the Mercedes
on the turn pike to New York.

New York City, Washington
D.C and Los Angeles

California don't represent
the real world.

They also don't represent
the real part of

America, the so-called
main street of America.

My tax money go to
Beverly Hill, well there

is a lot of money in
Beverly Hill. I don't

think that they need my money
down there. But that's

a different world. It's
not reality down there.

If you ever visit Union
and need a hair cut, you

may well end up at Frank
Petrilli's barbershop.

But unfortunately
people lost their homes

because they lost their
jobs. And it's a...

They now live under the
line for the one time

they were able to do
it. And a lot of the

young people, specially
educated, they try

to move, go out of town.
But I believe that

no matter where they go
the situation is the

same. Where are they
going to go? Detroit.

Now listen son, I wasn't
going to tell you

this, but you're the
reason we came here all

the way from Indiana.
You heard all the

talkers. Now I'm going
to show you the doers.

The US government has launched
bailouts, stimulus packages

and guarantees to the tune of
ten thousand billion dollars.

I caught myself wondering
for the hundredth time how

the hell I got here, what
the hell I'm doing here.

That's more then the
total cost of the US

government for World War
One, World War Two,

the Korean War, the
Vietnam War, the Invasion

of Iraq, the new deal
with the Marshall Plan,

and the Moon Landing.
Bush almost racked up

more US debt then all
presidents before him

combined, from George
Washington to Bill Clinton.

And Obama is almost
creating greater debt

then all presidents before
him, including George. W Bush.

But it's not just US that's
increasingly looking

like a house of cards.
During the crisis many

governments went deeply
into debt. Estimates say

that the average debt
in the richest nations

will exceed one hundred
percent by the year two

thousand and eleven.
These are loans taken

at currently low interest
rates. Should the

interest rate rise by
one percent, the US

interest payments will
rise by one hundred

billion dollars per
year, that's more then

the annual cost for
the Vietnam War.

Sometimes it's just an
engine failure, other

times it's the deadly
flat. If the pilot's

lucky, the flat kills
him. But usually he

isn't and he burns to
death as he spins in.

It sounds absurd to even
think that the United

States, the world's
economic super power,

might crash. After all
they get the highest

ratings from the credit
ratings agencies.

One of the lessons we
must learn from the

mortgage related sub
prime is you have to

take credit ratings with
a big grain of salt.

Because as we saw with
the mortgage related

securities, they went
from triple A rating to

jump bond pretty fast
once people understood

the true situation.
Today the Untied States

is rated triple A but
if it doesn't start

taking steps to put it's financial
house in order, that triple

A will be lost, it's just a
matter of when and how quickly.

In September 2008 the
bankruptcy of one large

investment bank brought
the world economy

to its knees. The fate
of Lehman Brothers,

raised the question of
who was next in line?

So everyone avoided doing
business with banks.

How will the world react
if the next entity

to declare bankruptcy
is a nation? Who

is next in line if
that were to happen?

Some houses of cards
have already started

falling. This is
Iceland, until recently

one of the richest nations
in the world. When

the crisis hit, the
Icelandic banks collapsed,

the Icelandic stock
market crashed leaving

the debt with a small
population. For the

first time in fifty years, this
peaceful country saw riots.

This is Greece, here
deficits have hit a record

high, the national debt
is approaching one

hundred and thirty five
percent of JDP. The

market wants higher
interest rates for Greek

loans, increasing the
pressure on its strained

economy, it seems like
the Greek government

needs a bailout to
avoid collapse. Italy,

Spain, Portugal and
Great Britain are other

EU nations with similar
problems. What about

my country, Sweden? The
country's finances

are fairly robust our
national debt and deficits

are lower then that of
most nations. But Sweden

is highly dependent
on the world economy.

More then half of our
prosperities are based

on exports. When other
countries crash, we

get hit almost as hard.
And Swedish housing

prices have risen during
the crisis, despite

the recession and despite
rising unemployment,

but because of low interest
rates and a government

mortgage company, SBAB,
making loans easier

to get. Swedes have never
carried more debt in relation

to their income. Doesn't all
of this sound very familiar?

We have new bubbles
everywhere so I'm

pretty worried about
what's going to happen

If you don't want bubbles
to burst, then don't blow

them up in the first place,
because all bubbles burst.

If enough things can
go wrong some of them

probably will. The
question is, just which

needle will burst this
bubble? Will it be

new credit loses? As
banks take on greater

risks knowing that the
government considers

them too big to fail. Or
falling stock prices?

As interest rates rise
and the steroids wear

off. Will it be the Chinese
economy overheating.

Or will it be a collapse of
confidence in the US dollar?

If we lose the confidence
of our foreign lenders,

and we must not allow
that to happen. But

if that were to happen.
Then it would be a

dramatic decline in the
dollar and a dramatic

increase in interest rates,
significant fuelling

of inflation, a very
very deep recession and

possibly depression that
would be felt around

the world. We must not
allow that to happen.

When the next bubble
bursts you cannot use

the same emergency
measures. You can't lower

interest rates that are
already at rock bottom.

You can't stimulate the
economy with borrowed

money if an excess in
national debt is the

cause of the crisis.
The governments could

save the banks, but who
can save the governments?

Ultimately there is
going to be a price all

around the world to be
paid for this and the

longer it continues the bigger
that price is going to be.

You know this really
is a moral question. I

mean I can give you
plenty of big and bad

numbers. You know when
you talk about tens

of trillions of dollars
it's just hard to

imagine. But you have to
put a face on it and to

me I put my children's
and my grandchildren's

face on it. It's their future
that we are mortgaging.

When we tell people
that there is going to

be a bail out bubble
and they see the world

equity markets up fifty,
sixty percent, they

don't want to believe
it's another bubble.

They want to step right
up that table and

throw their dice and
try to win their hand

at the wheel of fortune that Wall
Street's spinning. So people

still don't want to believe
that the worst is yet to come.

It's easy to think of
these predictions as

much too gloomy, but
that is exactly what

people said the last
time. When these experts

predicted the two thousand
and eight financial

crisis they were laughed
at in the media.

We can do it, but we need
to do it soon because the

clock is ticking and time is
not working in our favour.