1) Listen to the Acts 1 & 2 of "Return to the Giant Pool of Money." Here's the link: Answer the questions below based on the podcast:
- What are the causes of the 2008 financial crisis?
- What role(s) did culture play in the story?
- How is this a story of globalization in the 21st century?
*In your post, please offer a concrete discussion of the questions via referring to content and examples from the documentary AND try to apply what you've learned about "Capitalism, Globalization & Culture" last week in your reflection of the podcast.
Full Answer Section
- Credit Rating Agencies: Was there any discussion about the role of credit rating agencies assigning overly optimistic ratings to these CDOs, further inflating the housing bubble?
- Investment Banks: How are investment banks portrayed in the story? Did they contribute to the crisis by aggressively buying and selling these risky financial products?
2. Role of Culture:
Consider these cultural aspects while listening:
- Wall Street Culture: Does the podcast depict a culture on Wall Street that prioritized short-term profits and excessive risk-taking over long-term stability?
- Greed and Incentives: Are there examples of individuals or institutions driven by greed and a desire for quick profits, contributing to risky financial decisions?
- Regulatory Capture: Does the podcast discuss the idea of financial institutions influencing regulators, leading to lax oversight?
3. Globalization and the 2008 Crisis:
Think about these globalization aspects:
- Interconnectedness: Did the podcast highlight how interconnectedness of financial markets worldwide amplified the crisis?
- Global Financial Products: Were complex financial instruments like CDOs easily traded and sold across borders, contributing to the rapid spread of the crisis?
- Lack of Global Regulation: Was there any mention of the challenge of regulating complex financial instruments in a globalized market?
Applying Learnings from Capitalism, Globalization & Culture:
- Capitalism and Risk: Relate the concepts of risk and reward in a capitalist system to the risky financial decisions made in the lead-up to the crisis.
- Globalization's Double-Edged Sword: Consider how globalization, while facilitating economic growth, can also create vulnerabilities through interconnected financial markets.
- Cultural Biases and Market Failures: Analyze how cultural biases towards short-term gain and a lack of regulation might have contributed to market failures in the financial system.
By actively listening to the podcast with these questions and frameworks in mind, you can gain a deeper understanding of the causes of the 2008 financial crisis and its connection to broader themes of capitalism, globalization, and culture.
Sample Answer
1. Causes of the 2008 Financial Crisis:
As you listen to the podcast, pay attention to details regarding the following factors that contributed to the 2008 financial crisis:
- Deregulation: Did the podcast discuss a lack of regulations on financial institutions and investment products, leading to excessive risk-taking?
- Subprime Mortgages: Were subprime mortgages, loans issued to borrowers with poor creditworthiness, a significant factor in the crisis?
- Securitization: Did the podcast mention the bundling of mortgages into complex financial instruments called Collateralized Debt Obligations (CDOs), which masked underlying risks?