Economic Crises
Arkadiusz Beer
2015-12-05
For whom is this presentation
- If you (or someone in your family) has a real estate
- If you have mortgage (or any credit)
- If you are working for non-media company
- If you do not know about economic cycles
Tulip Mania (1636 - 1637)
Semper Augustus Tulip
Tulip Mania
- Peak price of tulip bulb was for 202 guilders
- Typical skilled worker at that time made about 150 guilders per year
- Today an average tulip bulb would cost around 70 000 dolars
- 1 bulb was traded for:
- 4 oxes, 8 swine, 12 sheep, 2 hogsheads of wine, 4 turns of beer, 1k pounds of chees, 2 tons of butter, 1 bed, clothes, wheat
- Valued around 2k guilders
- Traded 40 tulip bulb for 100 000 guilders
- One Semper Augustus Tulip had been seld for 6 000 guilders
- Sellers had made purchases on credit
- Greater fool theory
Great Depression (1929 - 1932)
- State
- World: I World War, wrong monetary policy
- Europe: Customs wars
- USA: Take loan, buy stock
- Deutsch-Polnischer Zollkrieg
- Everyone wanted to invest
Great Depression - Black days
- Black Thursday (24 October 1929)
- Black Monday (28 October 1929)
- Black Tuesday (29 October 1929)
Great Depression - Effects of crisis
- 1/3 of unemployment
- Chain of bankruptcy (Kredit-Anstalt Bank)
- 46% industrial production in USA
- Almost all US banks has been closed
Great Depression - Regulations
- Financial reports every year
- Glass-Steagall Act '33
- Seperation of retail and investment banking
- Government intervention
- Hiring unemployed people by sate institutions in 1933
Dot-come bubble (1995 - 2003)
- 17 September 2001 (6 days after WTC)
- 6,98% on one day
Dot-come bubble
- Pets.com
- Interviewing people on the streets
- Lost $147M in 9 months
- eToys.com
- Selling toys
- Million of dollars spent on marketing and partnerships
- $247M debt
- theglobe.com
- Social media sites
- In IPO stocks prices jump form $9 to $97
- Closed up in March 2007
- Flooz.com
- Virtual currency
- Money-laundering scheme
- Started in February 1999, closed on August 2001
Dot-come bubble in Poland - WIG_Info
Dot-come bubble in Poland - Asseco Poland SA
Dot-come bubble in Poland - CD Projekt SA
Dot-come bubble in Poland - Comarch SA
Dot-come bubble in Poland - Sygnity SA
Subprime mortgage crisis 2007–2009
- 1999 deregulation of Glass-Steagall Act
- Merging Retail Banking with Investment Banking
- US Federal Reserve lowers Federal funds rate 11 times
- from 6.5% (May 2000) to 1.75% (December 2001)
- Alan Greenspan lowers federal reserve’s key interest rate to 1% in 2003, the lowest in 45 years
- Take credit
- By 2008, typical US household owned 13 credit cards
- Home ownership rate increased from 64% in 1994 to an all-time high of 69.2% in 2004
Subprime mortgage crisis - Mortgage-backed security
Subprime mortgage crisis - consequences
- Deep recession
- 9 million jobs in 2008
- Housing prices fell nearly 30%
- Stock market fell approximately 50% by 2009
Subprime mortgage crisis - consequences
- Deep recession
- 9 million jobs in 2008
- Housing prices fell nearly 30%
- Stock market fell approximately 50% by 2009
Subprime mortgage crisis - Banks
- Bankruptcy
- Lehman Brothers
- Bear Stearns
- Forced sales
- Merrill Lynch sold to Bank of America
- Washington Mutual sold to JP MorganChase
- Loss of credibility in ranking for Moody's and Standard and Poor's
- The US Federal Reserve lending program
- Henry Paulson financial rescue plan
- American International Group (AIG) 85 bilion dolars
- Troubled Asset Relief Program with 700 bilion dolars
Subprime mortgage crisis - prediction mechanisms
- Technical
- Gaussian Copula
- Monte Carlo Simulation
- Fundamental
- “There was the greatest bubble I've ever seen in my life…The entire American public eventually was caught up in a belief that housing prices could not fall dramatically” - Warren Buffett
- “A Home Without Equity is just a Rental with Debt” -John Posner 2001 was criticizing the massive growth in home equity loans and refinancing for consumer purchases, amongst other things
- Calling housing market a 'ponzi scheme' by Greg Lippman, Deutsche Bank in 2005
- Robert J. Shiller gives talk about housing bubble to Federal Deposit Insurance Corporation in 2005 and writes a book about it.
Chinese stock market crash
- 12 June 2015
- Shanghai Stock Exchange
- Causes
- Investing with borrowed money
- Greater fool theory
- Drop
- Shanghai 8,5%
- Dow Jones next day on open 10%
Chinese stock market crash -SHANGHAI B-SHARE INDEX
Chinese stock market crash - Shanghai Composite Index
Chinese stock market crash - Hang Seng Index - Hong Kong
Poland comparing to European countries?
Thank you
- Any Questions?
- Title: Economic Crises
- Author: Arkadiusz Beer
