garvia.es

Session 8 – Student Recap (English)

Date: 29 Sept
Housekeeping: Final exam set for 3 December. Make sure you’re in Moodle.

What we did (fast recap)

Core content – Monetary policy, plain and simple

Why it matters

Vocabulary you should own

For next class (prep)

  1. In 3 bullets, explain M0 vs M1 vs M2 (what’s in/what’s out).

  2. Pick one central-bank action (rate move, QE or QT) from the last 15 years and note its intended effect.

  3. Skim a short case on Silicon Valley Bank (2023)—think liquidity + duration risk.

Coming up: Supply- vs demand-driven inflation, SVB autopsy, and how central banks try to thread the needle.

Transcript

It’s because I you can. It’s you yesterday because I thought sorry for that. Don’t worry. Anyone is. No one is going to deliver it late.
There won’t be any problem.
The final exam will be hold the third, I think 3rd of December.

  1. It makes 5 for everyone. Yep. OK, then edit that before talking about monetary policy, let me just say it 2-3 words regarding edit that, edit that. Does this make sense?
    And it that’s thinking about almost thinking about almost everything. And it that’s is important. Do you remember?
    I know we talk about Albert Pavillera. We remember him or where he was. For sure, it’s a person as a person. Albert Pavillera was the name of the street, no?
    You are in Madrid and Madrid has more than 4 centuries and let me show you.
    Let me show you.
    This is spare.
    Everybody see, yes.
    And then you should go. I mean, you should go. You can do whatever you want, but I strongly recommend you.
    Sintra in Portugal or it is here. Sintra, Sintra.
    Do you remember? Do you know the Smurfs? Smurfs. One little glue. You guys. A lovely place.
    Mandi and lot of.
    A lot of beautiful things. I mean, Portugal is beautiful. Lisbon is beautiful. Have you been in Lisbon?
    Did you find it? Did you went to Sintra? Sorry, I mean it’s relatively Sintra.
    Is relatively close to Ligon, yes.
    Then I have already told you about Egobia Avilan Toledo.
    And once I trumpet, once I hear, I think I tried to hear one time at the beginning of the course, I didn’t hear it. But once I hear that trumpet, I like, I like to say that.
    We are here, here, here, where we are, Alberta Villera. This is the street. We are here surrounded by military.
    Military. That building is military.
    This is a no. Sorry, this one is Palacio Lydia. Palacio Lydia is not a must, not a must.
    But it’s in Princessa and it’s what is 200 meters from here, far from here. Palacio Lyria. It’s the House of the Duke Duke.
    She used, she passed away two weeks, two years ago and the Duke is the person, the no ERE person that has more tilers. She was more than the UK, but whatever she used to have long time ago the military power.
    And all these buildings, all these buildings.
    He he was the Duke, used to be, I don’t know, two centuries ago, the Bosh of military and he was surrounded.
    By all military places. So Moncloa, that building is military and all the buildings that are close to there are militaries. Yes, Madrid use Madrid is an old village.
    And as all villages, so it was surrounded by a wall.
    In the outskirts of the city.
    This used to be the old skirts, the old skirts of the city. What can you find? Military places and also.
    Like single homes like palaces that used to be in the old scout.
    If you go to Serrano to to one part, if you go.
    This Barrio Salamanca, you go El Retiro. All of you know El Retiro.
    All of all of you should know Cretiro. Cretiro used to be also in the outskirts, yes. And here there are still houses, big palaces that used to be these palaces were from.
    Were for a belong to rich people that has two houses, one house inside Madrid and another house, the palace that was outside the city, not outside but in the.
    The border, yes.
    Madrid was surrounded by a wall.
    Near the royal palace you can find.
    Parts of the old wall. But it’s hard. I mean, there are no parts of the wall. But what can you find? Not the wall itself. You can find the doors of the wall. Have you seen Cibeles? Sorry, Cibeles Puerta del Cala. Puerta stands for.
    Huerta in Spanish. Huerta stands for gate door. What do you call that thing we have in the wall there? Huerta. Huerta stands for wall. Let me show you.
    Puerta de Alcala. I will bet that all of you have seen Puerta Alcala. You know Puerta Alcala. Have you ever heard Puerta Alcala? No.
    Who have heard about Puerta Alcala? Puerta de Alcala means Alcala’s gate and Alcala is a village. Let let me here there is Puerta Alcala.
    Yep, and this used to be one of the gates of the city.
    From one port, one part and the other, there used to be a wall. And why these gates exist? Because of war? No, no, because of war. Why these gates exist?
    Anyone.
    A word that is trendy now in the US.
    No, no, no, no, no, sorry. Thanks. No, you. Thanks a lot. Another world that is trending the US. Why this world exists?
    This is Puerta del Cala. Alcala gates. This is Calle de Alcala. Calle del Cala. Calle del Cala is the longest St. Calle del Cala. Yes. And where is Alcala?
    Here is Ocala.
    This is Alkala, yes.
    Why these gates exist? You have also Puerta de Toledo.
    Toledo.
    Yep, here you’ve got Puerta. I don’t know how how this one is called. Puerta de Puerta Yellow. It’s called the one we have in Moncloa.
    Huerta de Yerra is called.
    What the ero? Yes.
    Why these gates exist?
    If if it is not migration.
    What is the other word that is trending the States?
    Let me give you prom is 1 tip, one clue.
    Trump. Have you heard of Trump? Donald Trump?
    Take a mandate.
    Last, last Friday.
    He used this word talking about the chemistry industry.
    Chemistry medicines.
    Many since.
    I’m looking for a word. Yes, the word has to do with Trump.
    Let me look maybe since.
    News.
    And you write also Trump.
    What is the word I’m looking for?
    No one. Yes.
    Start.
    Why these gates exist? Make sense?
    Makes sense. No. In these gates, physically you stop the travellers. What are you carrying? What do you have in your? What have you? What do you have in your, how do you call it, car?
    The place with horses. What have you in your car? Let me show you. Oh, you are taking grain. So you should live here at 10% of your grain. You are taking beer. You are taking whatever. Make sense. The gates were the place.
    Where tariffs was were applied and now.
    I I am playing this game since 20 of January. At the beginning I start playing the game without realising I was playing a game, but now I am playing a game knowing I’m playing a game.
    It’s Friday. Trump throws a piece of you. It’s Friday. Why? Because he’ll. I mean, I don’t know. I haven’t asked him. Yes, but he likes. He wants to be media during the weekend.
    And in order, in order to have people talking about him during the weekend, what he should do, throw a piece of new. What is the piece of new Trump has given us during this weekend?
    Tariffs 100% in tariffs regarding medicines, yes.
    Results.
    Any thoughts?
    Do you mind if I share my thoughts? Would you? And please with something in my head?
    It’s not correct. Try to correct. If it has to do with mental illness, be polite. Please don’t be so rude, yes.
    There, let me just a brief introduction.
    Before tariffs BM dot BMB. What do you call it? In in Spain I would say. I’m talking about a car, Audi. How do you say BM?
    BMW Yes, if you have, if you want to sell a BMW in the States.
    The tariffs that apply this and W were much lower than the tariffs that apply to one that will buy a US car in Europe. There was a not fair situation for the states regarding tariffs and cars, for example, yes.
    What I’m saying is that.
    Fairness.
    I I think that Trump was right when thinking about fairness and tariffs, yes, and there has been a lot of movement. Personally, I think that Trump is not thinking about.
    Just about free trade. Trump is thinking about geopolitical movements. Yes, Trump is using tariffs as a mean of negotiation. But once I have said this.
    Do you remember 3 weeks ago or two weeks ago that I told you, I asked you what had happened regarding that nothing had happened and it was because, I mean, I don’t know if it was because, but this, this thing regard not this thing, the assassination of Charlie King, yes.
    That weekend there was a spot without news, but now we have news again. Yep.
    Let me talk about medicines.
    The average, if you try to buy one medicine, the average price for medicines with brands, I’m talking not about genetics. Do you know what is the difference between genetics and non genetics? Genetic medicine are normally much cheaper because you don’t need to pay patents or you don’t need to pay anything, yes.
    The point I’m talking about non generic medicines, yes, average price for non generic medicines in the States.
    Four time, four times more expensive than the same medicine being bought in Europe.
    Four times more expensive in the States than in Europe, and there are specific cases of medicines that the price is 7 times more expensive in the States than in Europe. Why this is in this way?
    Because medicines are being purchased in Europe in a centralized way, but in the States there is not a federal agency that buys medicines in a centralized way. Make sense?
    So.
    Is this fat? Is this better?
    I think that absolutely no. I mean makes no sense. American citizen pay more than four times more than a European citizen for the medicines. Make sense.
    OK, Trump’s Trump has seen this and he wants to fight against that, yes.
    Trump has put 100%. Tariff has announced that he was going to put 100% Tariff to medicines.
    Produce outside, outside the States and the ones that will not have these tariffs are all these manufacturers that has a plant in the States, yes.
    Two quick thoughts. Two quick thoughts.
    First one, and this is what I’m thinking. If I am wrong, please correct me. Yes, first off, if medicines are four times more expensive.
    And you put a tariff of 100%. What? What is the first consequence?
    That medicines are gonna be much, much more expensive.
    So personally, I don’t see the point in putting tariffs.
    And making things more expensive for U.S. citizens.
    I don’t really, really, really see the point. Thinking about this point, one one thing else, midterm selections are close.
    I will not. I mean, I don’t know, but probably Trump will give. I don’t know. I’m just making up. Yes, that Trump will be a check as a dividend of all tariffs that has been applied to the citizens. I mean, I don’t know if it will happen or not, but.
    At some he he want, he will look because tariff is a work.
    That has to do with Trump. OK, so one thought is you put a tariff in something and who will pay the tariff? The citizen. OK, and a second thought please that once you have them do this.
    Probably you will get.
    People building factories in the States that this could meet, this could have same sense, yes.
    OK, this is what has happened during this weekend.
    What else? What else? What else? Say.
    We continue with tariffs and all this stuff.
    OK, another another thing.
    I want to serve with you.
    I’ve already.
    How is this in LinkedIn and it’s in Spanish, but let me here it is. Let me show you two ideas that continue.
    Sorry for the spam.
    Sorry for the spam.
    The idea has to do with.
    And I’m going on one hand you have exports, exports from the West and exports from the yes.
    Thinking about this one is absolutely clear in year 2000.
    Europe and the States used to manufacture and now we don’t export anymore, yes.
    Europe and the States.
    Manufacture. That less what Trump is trying to do, bring manufacturers, bring factories in the States in order to manufacture again. Yes, and on the other hand, dollar.
    Dollar in the 70s, 10% of global currency used to have with dollars 10%. Nowadays we’re talking about 48% of global currency.
    What I want to show you that it has been a seat in exports and what is the most important and and it’s a joke, but not too much. What is the most important thing USA export to the world?
    Dollars. Dollars. And what is dollar?
    What is the alarm?
    Yeah, I know the question is strength.
    Can you eat dollars? Can you burn physically dollars? I mean, you can do it, but I mean the only thing you can do with dollars.
    Apart from accounting trading, accounting trading and use it as a storage value. Yes, it’s value in order to have it. Last week we talked about German hyperinflation. Do you remember it? Last week we talked about German hyperinflation. What is inflation?
    A lack of confidence in the system. I mean, inflation is more things. Inflation is purchase power. It has to do with purchase power. But what is inflation? A lack of confidence. Yeah, why there was German hyperinflation?
    Because German government used to explode the machine, the printing machine, yes. And because of that, oh, you are you are giving me papers, but I don’t trust these papers, yes.
    Last week we talked about Bretton Woods. What did Bretton Woods mean?
    I don’t trust. With all respect. I don’t trust in currency. What do I trust in? Paul. Breton Woods agreement is gold standard. I don’t trust in currency, but I trust in gold, yes.
    1972 with Vietnam War because USA need to pay, need to pay Vietnam War. What happened?
    What happened that they broke the states broke written good agreement, yes, in order to print more money.
    And nowadays.
    I’m summarizing. I am making a big jump, but this this jump will spoil today’s class. But I want you to focus. We are going to finish today with monetary policy.
    We will finish with monetary policy and I want you to see to think about two or three things. We will go through them. The general idea is that.
    Dollar is man’s dollar nowadays.
    It’s much, much, much more than just currency.
    Do you know Argentina?
    Argentina once they broke or do you know Ecuador?
    Ecuador used to have Sucre Sol. She’s from Peru and Sol.
    It’s month. Whatever. Nothing. I’m going to take a sentence just right now, but let me go with the bistes. Once Ecuador, once Argentina broke.
    What was their safe line dollar? They did in Argentina the Corralito and those who owned dollars were safe.
    Then if you look at.
    Petrol. Frederica. Frederica. Yep. How is Norway and petrol trade?
    How petrol? What is the currency? Global currency for oil dollar?
    You see what I mean? Dollar is much, much more than just currency.
    Is something that is there.
    What I have done till now is thinking.
    Beginning out loud. How do you say when you say? How do you say when you just say what you think?
    Thinking out loud. What I’m doing is just thinking out loud. Now we are going to move through with data. Yes. Now I’m going to show you what is going on. But what I have been thinking, but what I was, what I have been doing is just thinking out loud, yes.
    But there are times that I think that for you is worthy also to hear these kind of thoughts. Why? Because.
    Being politically correct is a restriction. And there are times that people don’t say what they think because, oh, I should be political, politically correct. I don’t know if I’m being politically correct or not. I think that I have to say anything regarding gender, regarding.
    Transgender. I respect everyone in an individual way, but I haven’t gone. I haven’t gone through religion. I haven’t gone through young people is this way.
    Yeah, salon, salad for last Friday and salon young people. I don’t know. What do you say? Whatever. Happy young people.
    Is saying happy job before is for it?
    What I’m saying is that I just care about taking care. I don’t care really much.
    Yeah.
    I was thinking about young people. Then I think about, I thought about United Nations.
    You know what is coming just now and at the same time, the same time I can say that I love Israel.
    The same I love, I love Israel and at the same time I’m say I can say that what is being done in Palestine is an absolute disaster and someone and I will use one word. I will use one word today that is, you know, I don’t know how to say genocide in English.
    That genocide. We can argue there are people arguing for us. I think that they I love Israel and at the same time not Israel because Israel is just, I don’t know if 1111,000,000 souls.
    Yes, you cannot just. And I’m sure that there are lots, tons of people in the right that agree with me that what is going on there is a genocide. Yes, and I don’t want to argue. I just want to to tell you I’m, I’m now thinking out, yes.
    Um.
    And before saying what I’m saying.
    It’s the same that happened with me with Charlie Clerk. I didn’t. I was not thinking in Palestine. When thinking about them before, I was not thinking about Palestine. But then United Nations, I’m talking about important things, things that have happened, pieces of view that are happening now. And last week in United Nations, a lot of things happened.
    Yep and.
    Criminalising, criminalising a nation is bad and we I personally I will never do this and what is happening in Palestine now now nowadays is absolutely disaster and is much more much worse but.
    Yeah, results.
    Any thoughts? My personal view is that there are times in life that you cannot be neutral.
    Neutral. Being neutral is not being neutral.
    You understand my point? My idea, what I… Okay.
    I’m talking about geopolitics. I’m talking about finance. Absolutely, yes. All these things matters for finance. Yes, personally in state. At the same time, I am saying all these things. I am absolutely worried because there are people missing.
    Palestine with religion, with politics and with ethnics. Yes, last week, last week we talked about German hyperinflation. Yes, after, after German hyperinflation.
    You.
    Hebrew. Hebrew. I don’t know how to say Hebrew. Hebrew. Hebrew. In Hebrew, there is one word that is.
    What I want you to say by using this word that those who forget their history, those that don’t know their history are doomed to repeat. I think that this place is a good place in order to think about history and trying to avoid saying.
    Things repeating and repeating personally hate something that I don’t like.
    And if someone’s.
    Like hate, this person has a problem. It’s a bad thing. It’s a bad thing by definition, and no one can like bad things.
    Because that is bad.
    OK, sorry for all these things, but I think it’s important I.
    Yeah, I I.
    If someone disagree.
    Someone disagree is.
    And it’s, I mean, for me it would be necessary to confront, to discuss a little bit. Not only I’m not going to be angry, I’m going to listen and probably I will combine that the other person has it has its point, yes.
    OK, let me quick, let me start with monetary policy and.
    Let me oh.
    Want to dry? I’ve cleaned everything. Oh, this is the same computer.
    Let me see if I have, Sir.
    I share with you this one. We open this.
    Oh.
    I clean this water.
    OK.
    Yeah.
    OK, these go from one side.
    OK, we’re talking about what was money. Yes, last week we went through German hyperinflation and.
    We talk about Bretton goods and we finish with Soros and the pond. Yes, a brief summary. German hyperinflation was a disaster. In Venezuela, in Argentina there has been. In Venezuela there is hyperinflation. In Argentina there is hyperinflation and.
    Millay Millay is fighting hard against inflation and he’s getting, from my point of view, from the economical point of view, he’s doing a miracle.
    Millay is doing a miracle by controlling the inflation. What is he getting now?
    When do you sing?
    Poor people starts, yes, by controlling inflation. If you can get confidence in the system, what you will get after that?
    If there is count, what you will get after count? People working. If people work, what is the problem with a I? What is the problem with technology? That if you have the power, if you have technology, you have money, you have the power.
    Social inequality increases, yes.
    But if there is inflation, there will be.
    More noise, less calm, and more social inequality.
    First thing, a government. I’m talking about a government. No, I’m not talking about a bank. A bank is like a government. Yes, I’m not talking about an entrepreneur. Yes, you own Spotify. What you should do? Sell licenses.
    But if you are a government, what is your first and let me say before everything else objective.
    Stability. Peace. You should get peace.
    Before much before public expenditure, you should get peace. What is the problem with public expenditure and governments?
    What is the point with public expenditure and governments? And there are two policies, monetary policy and fiscal policy. Yes, monetary policy and fiscal policy. When I’m talking about stability, I’m talking about.
    Monetary policy, yes.
    What is the problem with fiscal policy with?
    With government expenditure with the problem.
    Absolutely. Thank you acrimonia and money that you think is not yours. What will you do? You will start.
    Register. You understand register.
    Governments with and I’m not talking. This looks like a joke. Who has this problem? Where is I’m thinking about France, I’m talking, I’m thinking about Spain.
    I’m I’m thinking also, no, you remember the ago.
    My I’m talking too much about the states, sorry, but but this.
    OK.
    Do you remember is the name of one crypto?
    But it become it was the name of one crypto, but also is the name. If you look at this, what is the name? It comes to your head.
    El mas El mas six months ago was food there in order to whatever public expenditure.
    OK, now we talk about money. Do you remember this graph? There was a lot of money. What do we call money? Depends. But today is not the day and.
    They are when talking about money. What is money?
    Where is money?
    There are. Let me open this one.
    OK.
    Want to go there this way?
    What is money?
    Mhm.
    On one hand, we have central bank balance sheets. What is central bank balance sheets? The assets of central bank balance sheet match with their liabilities.
    Yep, central bank balance sheet correspond with their liabilities. What are the liabilities of central banks?
    Notes printed and coins issued by Central Bucks. Make sense.
    So what is this?
    Money printed by central banks, but also central banks.
    Gives money to the banking system and banks takes deposits from the public and give loans. Make sense? On one hand there is central bank balance it and from that balance it.
    The banking system multiplies the amount of money that is in the system. Make sense.
    Yep.
    And this money being multiplied is what we call M1 or M2 depending what types of what type of deposits we are talking about if we include.
    Short term deposits, we are talking about M1 if we include.
    Short term deposits and longer time deposit. We will be talking about M2 makes sense.
    Let me go back here. What I’m talking about, I’m talking about.
    OK.
    And zero, but it’s called more may study.
    Base. What is the monetary base? The money printed by the central bank. And if I say printed, sorry, sorry for using the word printing the money issue, Yep.
    M0 and then we can talk about M1M2 or M3 that it has to do with M0 plus.
    The questions, yes.
    Makes sense.
    I’m talking about monetary policy. Please, if anyone is sleeping, I want to. I want him or her to wake up for just.
    One minute. One minute.
    You can sleep in one minute time.
    Yeah, just one minute. Yeah, you, you, you, you. I mean you and the rest of the world. I’m just speaking up you because I want everyone’s attention. Yes, so quick.
    Monetary policy. What a central bank can do? What a central bank can do? A lot of things, but I’m going to focus into two before year 2008.
    Central banks normally used to do just one thing that is.
    Interest.
    Rates. Yes, playing with interest rates. I’m going to talk, I’m going to explain you with more detail, but the idea is.
    Are you? Are you happy? No, sorry. Are you sad? Are you sad? In case you are sad, what I’m going to do is giving you points with the grade. So I’m going to give you money.
    If you are sad, if you are depressed, what I’m going to give you? Free money. I’m going to decrease interest rates. If there is a crisis, if there is a crisis, I will drop interest rates. By dropping interest rates, you are giving money to people. Make sense.
    People will get happier. But if you get too happy, you can start shouting. Nobody can come here. What I should do? What I’m going to do? I should punish those that are not at class. How do I punish people?
    I increasing interest rates. What if everyone gets thinking about monetary policy? Yes, I give free money, I give money, I drop interest rates. Everybody gets happy. And what happens with prices? Prices start increasing. People spend.
    More than they used to have. Make sense?
    Yep. And once there is inflation, I should increase interest rates to calm down the economy. Yep. So one idea is.
    By playing with interest rates, I can control the amount of money that is in the system. Got it.
    Second idea after 2008.
    If I drop interest rates to 0, but I need the system to continue moving, there is just one choice that is.
    QEQE stands for quantitative vision and QE quantitative vision is an euphemism.
    Do you understand that it’s not the same saying someone pass away? That’s saying someone has his head out of their her body and everything full of blood. These are two different things. No pass away is an euphemism. It’s a more polite way of talk.
    Quantitative easy is a polite way of saying I’m going to print money because I don’t have more tools. But if you say things in this world, probably German people will not like it too much because German hyperinflation phantom.
    Make sense?
    Two ideas, two quick ideas. A central bank can place interest rates increasing or dropping.
    And the second idea is that you can print more money or you can try. Once you give money to people, it’s easy to get this money back. I give you money, I can get it back.
    It’s harder. Let me. Yes, right. Also not just quantitative fishing, but also quantitative tightening. What is quantitative tightening? Time to take your money back. Is it possible? We will see that. No. Make sense.
    So.
    I have.
    Three things. I have three things.
    I have three things. M zero. Let me choose M2. Yes, M0M2 and interest rates. Great.
    Monetary base and zero and two and interest rates, yes. And let me show you, let me share with you, let me talk about.
    The evolution of these three magnitudes, Magnitude, Magnitude. These three magnitudes is correct. Magnitude these three.
    Numbers.
    These three.
    Interest rates, monetary base.
    I’m.
    And.
    One database these three.
    Numbers. Yep.
    What is this? These are interest rates. I’m going to go to year 2008. Yes, I’ve taken from 2008. What happened in September 2008?
    September 2008.
    Yeah.
    Prices.
    But look, look 2008, September 2008. There is one specific day.
    Let me let me ask you two different questions. Yes, let me ask you two different questions.
    February 2020 or January 2020, what happened?
    I say year 2020.
    All of you know what I’m talking about. The lockdown.
    Will you ever forget the lockdown? Will the lockdown be in your memories forever?
    So yeah, you are just alone. What is your?
    If you are here, the other Korean is like, see, we’re here. So talk with her. There was, yes, there was a lockdown in Korea. Korea lockdown underneath there was.
    Inland also Norway.
    In the States, Charlie is not here, but there was a lockdown.
    Are you good? No, it’s probably the only concur was open.
    Forget about three. Yeah, no, no.
    You OK? You you guys still look now. I know.
    What is the pandemic? No. Is there a before and after the pandemic?
    Let me go to the other important.
    September 2001. What happened? September 2001.
    I don’t want to say the exact date.
    What happened in September 2001?
    Yeah, I know it. Is there a before and after the 911th?
    Absolutely yes, 9/11/2001.
    14th of September 2008. What happened the 14th of September 2008?
    Lehman collapsed. Lehman bankruptcy. Lehman Brothers bankruptcy. And what happens in January 2020? COVID. Is there a before and after? Let me.
    Let me move this here. This is right, yes.
    OK.
    These are three different moments, but at the same. There is the same story. What is the name of the story?
    Internet which in the world. Internet which in the world. What makes the 11 of September different? The whole world show this line.
    The second tower, the whole world show this life. Then Internet touch financial markets and then Internet touch governments, states and universities, yes.
    Did university change? Did school scholar system change in 2020? Did it change?
    In my heart, at least, was an option before an.
    With the 2020 crisis, with the COVID crisis, I went out of the closing.
    Been out of the closet. I went out of the closet. I mean, I am still a heterosexual. I mean, I’m still, but before the 11th of September and for that smile, I thought I was.
    Before the 11th, sorry, before the COVID crisis, I will never think in asking in one school or in one university. That’s the qualar system, Sax.
    After the COVID, there was no point in asking that because everyone knew.
    Do we continue doing things the same way we use? We did it before. The banks after the demand grass continue working the same way they were before. The media work after the 11 of September the same word way they use.
    To work before some somehow, yes and somehow no. But trust me, these three things may the world change.
    And once things change, there are times that you cannot go back. Make sense. OK, let me.
    Before I’m talking about finance, no, this class has to do with finance, so the important date for us will be 2008.
    The important date will be 2008 and let me explain you. Let me explain you how the world used to work before 2008. Let me explain you how the world used to work before 2008.
    And then we will move.
    Four, yes.
    How did the work used to work before 2008? I’ve already told you. Here you’ve got this graph. Sorry, this graph is in Spanish. This graph is in Spanish. I did it and it’s just.
    In green, interest rates goes up when there is growth. Why do you increase interest rates? Because people are happy because there will be inflation that is growth. And once you increase interest rates, there is a crisis. Why? Because you have frozen the economy so much that you you need a little bit of heat.
    In order to continue working, then you reach procession and you are forced to drop interest rates. Yes, once and this is let me go here before year 2008.
    This is the monetary base, yes.
    This is the amount of money that is circulating in the system. Let me.
    Yes, they September 2008. Perfect. Let me put some numbers here.
    2008, yes, monetary base.
    0.8.
    Yes, monetary phase is.
    Eight 847.
    Billion, yes, 847 billion.
    Trust me, it says 847 million. That is 0.8 trillion. Make sense?
    And let me look for the amount of money that circulates in the system.
    7.8 in order to make round numbers, yes. Let me write here 8, yes.
    83 Yes, what I’m saying that here money, monetary multiplier times 10. Yep.
    And did you see?
    This grows more or less at the same rate, more or less at the same rate this grows.
    Is there any change there?
    I mean here there is something that has to do with the.com crisis, but but if you see this, this is stable, no?
    If you work in the money in the fair printing press, all your life is quiet.
    And then you look at this one and say.
    These days, what was the work of a central banker has to do with the two graphs? Not too much. The work is here, yes.
    Same period of time, yes, same period of time. If you look here, what can you see by looking here? These are interest rates. And do you remember the game that I told you if there is?
    Could go something over on if.
    If things go well, then increase interest rates, preparing for the moment where there there is a crisis and dropping, yes.
    1972 From this point to this one, from here to here, what is there stability, you know?
    Once Breton boots broken, but can you find here a lot of movement and at the end look at here.
    I hear what these graphs tell you. Do you hear that this is like a electrocardiogram, like a heart?
    Meeting there are cycles, yes.
    If there is a crisis, you decrease interest rates, you drop interest rates, make sense.
    I really love.
    The rise stability cows and then winter is coming. Let me this is coming. Let me leave it before that by looking the peaks of that graph. By looking the peaks of that graph you can see.
    Breakdown of Bretton Woods, first oil crisis, second oil crisis, US recession and Iraq war dotcom crisis, financial crisis, yes, and if you want to go into more detail.
    I did this graph with GPT and I’m so proud of it.
    I’m so proud of it. I mean, I did it with I I knew before all the points, but I put I took a picture of that graph. I uploaded it to Chatty PT. Tell me all this and.
    And the the sensation I have after doing this was of being, oh, I love myself.
    Why? Because by looking these points.
    You can look, you can feel history of humanity, of recent humanity. Make sense.
  2. Any questions?
    I could. I mean, personally, I would love to go into the oil crisis. Norway discover oil on one hand, the OPEC was founded on the other one and the oil crisis was.
    One thing that had happened 50 years ago.
    Vietnam War, Vietnam War length 20 years. Vietnam War length 20 years. It finished in year 71971 two, yes.
    First Yom Kippur attack was in 1972. Fifty years after that attack, there was the Hamas attack, 50 years after.
    20 years length Vietnam War, 20 years length Afghanistan war after after Vietnam War, the oil crisis, after Afghanistan, the energy crisis.
    Make sense what I’m saying? I’m saying that there is a parallelism in history.
    Not saying. I’m not saying that history repeats. I’m just saying what Mark Twain used to say, Mark Twain said. History does not repeat itself, but it rhymes like poetry.
    It writes make sense. So personally I would like a lot to be talking about that also in 1985.
    In 1985, there was the Plaza. You know that in New York there is one hotel called Plaza Plaza Hotel. In that hotel there was an agreement regarding.
    He said it, he said it in particular regarding the States and Japan, but I don’t want to talk now about that. I I want to talk about this thing that is written is coming.
    What is coming? And let me move here. Let me move here. These are interest rates and here goes.
    Have you have out the.com crisis?
    No, perfect. I’m happy for this because this makes my work useful.
    At the beginning of the Internet, at the beginning of the Internet, there were web pages that were so that were done. Then people get on fire. These web pages were so.
    And there was a big, big, big bubble regarding web pages.
    What pages? That means almost nothing. Yahoo has a valuation. There were a lot of companies.
    Just with a web page that were trade for bill, not billions, but 400 million. There were people buying web pages for 100 million in the at the end of the 90s, yes.
    What normally happens with bubbles?
    They bars.
    Dot-com crisis bubble explode here, more or less here, yes. What Federal Reserve did? Drop interest rates, yes.
    All of you see the movement?
    And why I have to stop in that point? Why do I have to stop in that point? Because it’s the September 2001. It’s just before the 11th of September attack. What happened the night of the 11th of September?
    The end of September in New York, it was at 8:00 in the morning. What happened this afternoon? What happened during this day for three days? This is something incredible. Never have happened before. For three days, all the air space was.
    Clothes. There were no blades for three days. There were no blades.
    And all people were absolutely frightened. Absolutely frightened. There was fair. Fair. No fail. Fear.
    There was fear. There was fear. Fear of what? Fear of global war of. And if there is fear, what people do are taking money. So what did Federal Reserve did?
    Drop interest rates, these interest rates and then they continue dropping and hear more these interest rates in this moment were this were the lowest interest rates in the.
    Present human mankind essence. The lowest interest rates. If you have free money and you don’t know what is going to happen, what people start doing.
    But people start doing.
    In this case.
    Have you have all the sub sub prime crisis?
    For today I have asked you to do a little. Anyone has why the subcrit, why Lehman Brothers all of sudden?
    Here there were a lot of mortgages in England. To whom? Who everyone could afford it. Here, for example, I work living houses, yes, and I get $3000.
    It’s month.
    $3000 this month by by by by constructing houses, yes.
    Could I get a mortgage for 1000? Yes, all of you understand what I’m saying. What Federal Reserve thought here we have recovered and Federal Reserve.
    Increase interest rates in two years, 5400 basic points. More than 400 basic points in two years. Make sense.
    Remember the example that I have given you 3000 and my world was we need houses and my mortgage 1000 yes.
    OK.
    Three ideas for at least two. If interest rate increases for 100 basic points to 500, my mortgage moves or could move from 1000 to 2000.
    And that’s not what I’m saying. My mortgage can increase on one hand increases, yes.
    And more the mortgage increases from 1000 to 2000, no, but then.
    What is going to happen if interest rates increases? What is going to happen with housing market? There are going to be more houses if interest rates increases or not?
    There are not going to be more people buying houses. So what is going to happen Thursday? What is going to happen with my work?
    I’m going to lose my work. So what is going to happen with the 3000 I was getting each month? There are not anymore. So on one hand, interest rates increases, my mortgage increases and me that I was getting 3000 each month.
    I’m going to get nothing. So what is what is going to happen with the mortgage that I got that the mortgage that was something?
    Financial interesting here becomes something.
    Becomes a subprime markets. Subprime is a word that stands for.
    Grab is polite or not?
    Sorry for city’s worst, not cheap. Sorry, go ahead. So prime is an euphemism, but I don’t want to say so prime. And what I don’t want you to see is that, oh, bad mortgages were sold here. No, people are stupid.
    What happened here? There were with Morganses that becomes scrap.
    Make sense?
    Not only that, there were. Have you heard of NBO’s, NBO’s, CBO’s?
    NB OSDO ABS.
    CBS, have you handled all these things? Have you handled that? Someone let me.
    Oh, don’t know who did it silence.
    OK.
    That is great. I want in English. I want in English a brief summary of the Lehman Brothers Van Grassi from 2008 explaining what are CBOSNBSABSCBS.
    With.
    That means considering these CDs are different nature of the others, Yep.
    What is a CDO? Collateralized debt obligation? What is an MBS? Mortgage-based securities? What is an ABS? Asset-based securities? What is a CDS? Credit default swap? What are these three things? CDOs, MB, MBS and A?
    Yes.
    Well this the first one packages of mortgages. If you have one mortgage by itself, credit risk is low. If you put all of them in a package, this product is safer in theory. But what you are doing, you are creating systematic risk by putting all together if there is a fail.
    The fail will be bigger. It’s like putting a lot of gasoline together in one place. If you don’t handle this with care, everything could explode. And also you are combining this with CVS. What is a CVS is an insurance. The nature is different.
    But I don’t want to go. I’m sorry, sorry for saying something to you without reading it, but I love to do this.
    Why? Because I know what is being written. Do you see that I’m using?
    Makes sense to use ChatGPT in this sense. Absolutely, yes. But I know what I’m doing, I know what I’m thinking and I know what ChatGPT will say. Lehman Brothers investment filed bankruptcy, tiggering toxic assets and leverage. Perfect US hosting markets NBA.
    ABS, CBO’s, insurance and contractor on debt. Perfect. When default, surget insurers like AG couldn’t pay. When perfect. Wileyman heavily. Yes, it perfect.
    Perfect. Careful. This is not the splurish.
    This is just one piece of the parcel, one piece of the parcel that match with this particular place. I have talked about the 11 of September. I have talked about several things, yeah.
    And I have just used GPT in order to take one of the pieces of the puzzle. I could write by myself ABS, mortgage-based securities. I could spend time there, but it’s better at GPT.
    I’m throwing it there. Yep. OK.
    Here the war thing we have recovered and here it was the bail off. Look, look at. If you want to understand this, look at the map. Here is the bail off of AIG and interest rates were dropped.
    Federal Reserve thought, oh, we have controlled the situation. Same as here. Here Federal Reserve said after the dotcom crisis, we have controlled the situation. Here, after the financial crisis, Federal Reserve thought we have controlled the situation.
    But while life is great, once we think we have everything under control, new things happens, yes. And here, September 2008, look, interest rates has been dropped before.
    Let me move this to year 11.
    Look.
    After Lehman Brothers crisis, what happened with interest rates? Interest rates were dropped to 0.
    Did you remember this heartbeat? Beep, beep. What can you see after this?
    B.
    You understand what I mean. This tool interest rates get broken.
    It broken. Why this happened? Yes, the night.
    All interbank carry market is interconnected. The night the bankruptcy, the night the 14th of September, the man has assets in other banks and liabilities from other banks, yes.
    Everything was interconnected and if Lima collapsed, what happened with the rest? What happened with the rest of the banks? There were more than nine calls that night to Federal Reserve and this calls what this call said.
    If you don’t give me immediately an average between 50 to 150 millions.
    If you don’t give me this night.
    An average between 50 and 150. Tomorrow I will follow same way that even.
    9 calls asking for 100 billions.
    Put on the place of the chair of Bernanke that night. Bernanke. Well, Bernanke did at night.
    He press one button. I don’t know if, but what did he do? Let me show you in the race were broken, yes.
    Let me move these two.
    October. Yes, he pressed one button.
    Oh, let me move.
    Sorry.
    He plays one ball.
    Do you see?
    You need 100 billion. You need 100 billion.
    Thank you. You need 80. Thank you. Heat over in one night. Look monetary base.
    Look monetary base.
    Dober.
    The amount of money circulated in the system this 1.6 is multiplies 1.6 yes.
    And what happened that night with him too?
    Let me move here. 2010 for example. What happened with him too that night? Nothing. It’s still a trillion. Yes. So here, money multiplier.
    Because this has over monetary multiplied banks in one night, banks lost half of their business if we think about banking business as multiplying money.
    Makes sense.
    Do you like cookies? Cookies. Do you like cookies? Now even in the kitchen, you’ve got your.
    And your favorite cookie? Yes, packets full with 30 cookies. You go to the kitchen and you think I’m going to just take one.
    All of you are with me. I’m just going to take one cookie. Is it possible?
    Fried potatoes. I’m just gonna pick one.
    I’m going to go out and I’m just going to drink one beer. Is it possible? I’m going to just glass of clowns.
    I’m just gonna play one play.
    I’m just gonna see one video.
    There’s one in the scroll.
    You know what I’m talking about? Is it possible?
    Let me move into the monitor device.
    What happens once you eat one cookie?
    You cannot stop any.
    Told you this is something I’m going to do this just for one time. I’m not going to do it again, just once.
    Guess once.
    This was the first cookie.
    This was the first thing.
    What happens after that first cookie? Iceland went into a bankruptcy. Iceland went into a bankruptcy. And then what happened here? Greek crisis, European crisis, the first of the two European crisis.
    Here, the Italian and the Spanish crisis. The second one. Yes. Oh, we have to recover. Let’s start with the tappering. And what happened here?
    OK. And what did Federal Reserve did after COVID?
    They pay money and they move from 3.2 to 6.3, yes.
    Make sense?
    What is Federal Reserve doing? Reading money? How this money goes? How this money reachs the economy? How this money reachs the economy in several ways. Here the money was given to banks.
    Here the money was printed and with this money, Federal Reserve vote US public votes, yes.
    Here at the beginning it was given to banks, but hold the money, hold the money.
    During the pandemic in the States was who money was given during the pandemic?
    But how? All these things are stable, all these, all these money, they are stable. But in the pandemic, all the money was given.
    You know, from your husband, but did your your dad, your man received? Or were you? You were committee or you didn’t received it. What I’m talking about, it was a stimulus structure.
    It was upset. I think you said even greatly to the citizens.
    What I want you to see before the pandemic, the money was given here. Yes, the stimulus check is not money here, the stimulus check.
  3. Is given is directly what you are doing is increasing the amount of money that is in the whole system, yes.
    This is the monetary base. Let me move to the amount of money that circulates in the system.
    What is this 3 trillion yen from 15 to 80?
    What this young represent? This young is caused by the sex, by the stimulus sex, yes.
    You see how the amount of money that circulates in the system? Both, no.
    And what is the jump cost? I’m looking for one more.
    Inflation, inflation. This young cause inflation and look the war against inflation goes there. Make sense.
    I’m going to continue next day with this story and I will talk about Silicon Valley Bank. I will talk about.
    Supply, supply inflation and offer and demand inflation. That is not the same having a war in Ukraine that giving sex to the one regarding inflation. Yes, and let me go quickly, quickly, I don’t.
    I don’t come. Oh, so happy to. The other day you didn’t come or there was, but I don’t care. I have just put one day more, so you are up to date. Abigail Wells.
    Same. I mean, not the other day. There was. You understand what I’m saying? No. Adam Randall. Same Alfa Ruter. You can do all Alice Connors.
    And you came to all Ali Stalia. You came to all Amy, Claire, Amy, is he nice?
    No, no friend. Oh, OK, then tell her that he came to work. Arianne Corinne.
    Audrey Grace, you came to all. Carlton Hates, Carlton.
    I feel sorry for him, but it’s not my problem.
    I mean, with respect, you understand the point. No. OK, Gato. Gato. Yes, you can do all. Claire Dugan, I cannot make a complete update, but if you came another day, I don’t care. You can do all.
    Yeah.
    Yeah, you have came to all classes, so you should. You can be happy. Connor. Connor, you know him.
    No, I don’t care about him. And sorry with John de Bani.
    Now, Dustin, feel sorry for him. Dylan Abba, you came to all. Elena, you absolutely. Yes, Beth. Beth. Tell Beth that she has came to all.
    And today’s as if it were here because I know who see whatever I don’t. But Eva. Eva. Yes, absolutely. Yes. Francesco Saracino. No. Francesco. Sorry, Federic.
    Yes, you can do all, Gabrielle Major.
    You have choose the correct day to come to class because you can feel as happy as see. Do you feel happy? What is your name? Claire. And you can be friends. Gordon Stewart, same.
    Two women, one men, same Grace Morgan. I’m going. James less than me. James. James. I don’t care about Gina Macy.
    You miss her, but you miss your friend. Tell her that she has been here today.
    Whatever. Don’t worry, you meet.
    He said. He said he’s here. Loden. Loden. No, Loden. I’m sorry for him. Sol. Sol is not here. Austin. Yeah, you you are up to date.
    Oh, sorry, Logan, you came to all. Ariel, of course you have came. Luke Mastrian, you have came to all. Marco Cavalieri. I feel sorry for the Italians today, but Natalia de la Plaza, Natalia.
    Natalia, Noah.
    So happy to see you, Olivia. Perfect. Rhea. Yes, you are here. Really. You can do all, Rhea.
    Really.
    You came to all Robbie. You came to all, of course. Kim, you have came to all classes, of course. And I absolutely love Korea. Yep. Thanks. Simone Beatrice. OK, Simone, Sophie Brown.
    Perfect. Talia Trusca. Great. Victory. Yes, Victor. Victor. Victor Jenson. Absolutely. You don’t need to come to more classes, but you will continue coming and Daniela.
    No, yes, Daniela, Daniela. She has not came, but in my head she’s here because she’s a fighter. Do you remember from the other day? I am still afraid. She has came.
    Any questions? I have me someone. Enjoy the Monday. Yep.
    Aaron, yes. Aaron, come on. All classes. Yeah. And you are in all classes and I love you.
    I mean, I guess I’m in the middle class. This is important. I have a way. You can do my course, whatever you want. OK, perfect. I’ll get my. I know who you are. Enjoy. Thank you. Enjoy. Welcome.
    Because I know I’m still fast.
    I mean, if I have told you that you are, you could be happy. It’s because you could be happy. OK. Because you in my head, in my list, you have come to all classes. OK. OK. Perfect. Thank you. Pleasure. So happy. Best one day ever. You too. Yeah.