Economist Andrew Lo speaks at MIT about economics and physics.  He talked about ideas that he and physicist Mark T. Mueller came up with as to why financial crisis happens.

It is a timely talk presented in June 2010 after the 2007 to 2009 recession.

He explains the Ellsberg Paradox by introducing to the audience a hypothetical game.

One of the main points of the talk is that financial crisis happens when tools developed are not appropriate for the level of uncertainty and risk involved.

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Most people have the traditional view that people deposit money into banks and then bank lend those money out to other people. Banks make money because it charges higher interest on lending money out than it gives back in depositor’s interest.  This is true to a certain extent.  But it is not a complete big picture of how the monetary system works in modern times (such as in the United States).

Think about all the big mortgages and large car loans that many people have taken out currently.  The banks have lend them all these money.  Do you think depositors have deposited that same amount of money into the banks?  Considering that the savings rate is around 1% and 2% in the United States around the years 2006, it doesn’t seem likely.

Perhaps the banks have all this money to lend out because the wealthy has deposited a lot of money into banks.  With saving interests rates often below inflation rate, do you think the wealthy really save all their money in a bank savings account?   More likely, their money is in investments such as stocks, bonds, and assets.

So where do banks get all this money to lend out to people?

The truth is that banks are lending out money that they don’t have.  They are lending out more money than what people are depositing into the banks.  If banks are lending out more money than deposits are putting in, where is that money coming from?   Banks are creating money. Money just appears whenever someone sign their signature for a loan.  In essence, money is debt.

You can learn more in the 2006 video “Money As Debt” by Paul Grignon

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And this is legal?

Yes, in the United States it is legal.  It is known as the partial reserve system.

In 2009, Paul Grignon created its sequel “Money As Debt II”.  The movie is appear to be in part a response to the economic financial crisis that the United States is in at the time.

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You can learn more on their website at moneyasdebt.net which have a references to quotations and transcripts.

Economist Laurence Kotlokoff paints a gloomy picture of United States economic future in the below talk at MIT and in his book The Coming Generational Storm: What You Need to Know about America’s Economic Future.

The aging United States demographics means that there will be more older people collecting Social Security and Medicare/Medicaid than there are young people generating enough money for these programs. This financial gap will get larger and larger the more time we wait. Kotlokoff says we need to do something immediately otherwise the fiscal system is headed for a meltdown. He has his own ideas as to what we should do. But will the politicians listen is a different story.

The talk was given on April 28, 2004 as part of the authors at MIT series.

The below video is a parody of Disney created by Professor Eric Faden of Bucknell University. It explains the U.S. copyright laws and the types of work that it protects such as music, film, dance, etc. It says that ideas can not be copyrighted. Only the form in which that idea is express is copyrighted. It talks about the duration of copyright and when a work goes into public domain when copyright expires. And finally it explains the copyright fair use doctrine.

The title of this video “Maxed Out” refers to the maxing out on the credit card. It explores the credit card industry and Americans’ propensity to buy things on credit. The dark side is that credit card debt can sneak up a person. And sometimes the debt gets so bad that the person commits suicide.

The video contains interviews with Elizabeth Warren, a Harvard law professor who co-authored the book The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke.

Mark Penn, a well-known pollster, speaks at Google headquarter about social trends. Penn is also the author of the book titled “MicroTrend”.

Seth Godin gives the following talk at Google titled “All Marketers are Liars” which is also the title of his book.