A Financial Crisis Q & A: Chris Smith with Andrew J. Neri

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copyright 2015 Chris Smith  All rights reserved.

After I finished writing this book I decided to thread quotes into it about the financial crisis timeline. But then I found myself full of questions. While my Parents and I had been on the ground of our own crisis, we had had no time to think about the "bigger picture". I was fortunate to be introduced to Mr. Andrew J. Neri, who actually studied the financial crisis, and honored when he agreed to take a stab at answering questions I had put together for this impromptu Q & A. I hope you enjoy reading it and maybe even learn something from it. I know I did!

For those interested in learning more about the financial crisis in the U.S. there is also a great documentary called "Inside Job" made in 2010 that I would highly recommend.

Answers by Andrew J. Neri, MBA, University of Oxford (2014)

1. As I understand it, you decided to do some research on your own of the financial crisis of 2008-2009. Why? And did your views of it change the more research you did?

Finance has always been a great interest of mine so when I changed careers I found myself with time to pursue my passion and thoroughly study the history of modern finance in depth. I think my views did change the more I studied it, or rather I started recognizing the interconnectedness of the modern financial markets and past world events.

2. In layman's terms what is a financial crisis?

A financial crisis can be defined as an event in the financial markets that negatively threatens the efficient allocation of capital. Meaning that borrowers & spenders are unable to receive money under reasonable terms from savers & lenders. This can take many forms, whether it is a bubble bursting in one sector or country that spreads to other countries or sectors, or a credit event that effectively seizes the financial market. It is important to realize that credit is one of the primary lubricants of finance to allow individuals and businesses to meet their obligations and bring goods and services to market.

3. There's so much information on the internet about what happened and everyone with their opinions, graphs, etc. When conducting your research, how did you separate opinions from fact and truth from fiction?

In my research I started with the history of the modern system. I focused on events such as the world wars and the 1929 credit crisis. I was interested in how these events shaped our modern system. Many people do not fully understand why markets work the way they do or the good that markets bring. I take a conservative approach to finance and came to realize that credit, when used responsibly can provide a tremendous good for humankind.

4. How long did the financial crisis in America of 2008-2009 last?

The financial crisis itself lasted until about 2012, however the effects of the crisis will still be seen for some years to come. Economic monetary policy has changed drastically for the foreseeable future with the introduction of negative interest rates and quantitative easing turning some financial theory on its head. The financial industry has still not recovered although it is gaining strength, the housing industry is still not as robust as it was in 2005-06 and many individuals are still suffering from catastrophic financial loss. In some of these cases, the effects will be felt for a lifetime.

5. Do you know the cost of the financial crisis to the U.S. economy?

These figures are debatable but speculation puts the total world figures in the $15-22 trillion range with over $9 billion being lost by US homeowners alone. These are staggering figures all around.

6. Did it increase the U.S. National Debt? And if so, do you know by how much?

According to the US Treasury the national debt prior to 2008 was around $9 trillion, which grew to around $15 trillion in 2011 and now stands at over $18 trillion. Lots of the money went to programs to help get the credit system functioning again through quantitative easing and bailouts. It is unfortunate because individual investors paid through losses on their investments in houses and securities in the short term and will see further losses through increased taxation to service the increased national debt, so they lose twice.

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