PBS Frontline - The Crash (1998)

Broadcast on an unrecorded date in 1998

PBS Frontline "The Crash"

The quality of the VHS was EQ and a bit noisy, but not distracting. The audio is clean and clear. The encode doesn't

use square pixels, so players which don't interpret the pixel-aspect ratio metadata properly will see a square image.

VLC handles it properly, as do most set-top Divx/Xvid players.

240x240 Xvid/MP3 AVI, 4:3 display aspect ratio

Notes:

In keeping with recent months' Frontline reportage (Bernie Madoff, crash of 2008, too big to fail, real estate bubble,

etc.) on the financial panic, recession, and ongoing developments in 2009, I recalled I had an old VHS tape of a

Frontline broadcast from 1998, which dealt then with the topics of the "Asian Contagion" and hedge fund

"Long Term Capital" that were the major panics of that time.

Here is that program. You can draw very clear parallels with the events and terms of that era, right though with what's

happening now, and what can very readily happen to us in the USA in the near future. You'll quickly see that terms we're

using now are actually not new, but are as old as our Federal Reserve System.

Pay particular attention to the crisis with the Russian ruble. The nascent post-USSR government was unable to reliably

collect enough tax to fund its own basic operations, and resorted to selling what would be their equivalent of

short-term treasury securities to global investors. Interest rates on these securities started out speculative and only

got more exorbitant as their treasury began rolling over debt by issuing new securities in return for the maturing ones,

capitalizing the interest into the principal of their national debt.

Once the interest rate became high enough to make repayment truly impossible, the government was forced to default on

its debt securities. This caused their fiat ruble to become worthless, and caused our own US government (taxpayers,

international holders of US debt) to take on yet another bailout of banks and the financial industry here, which was

over-leveraged, having heavily speculated on the ruble.

This debt scheme is _precisely_ what we're doing right now in the USA. What had been a stable market for long-term

treasury bond issues has largely been replaced by a much more short term market for faster maturing notes and bills. As

long-term bonds fall due, our treasury is redeeming them for short term bills and notes at (slightly) higher interest

rates.

The central bank's ability to artificially manipulate interest rates is not limitless and these days depends on the

credulity and cooperation of the central banks of other large nations (we must all inflate together, to repay our

respective national debts in cheaper currency units). If any one of the net producer nations wakes up (like China or

Australia or Germany) and starts to get their own central bank manipulation under control, the ramifications would be

dire for us, and would precipitate USD inflation not felt in living memory.

I find FRONTLINE does a great job of making financial crises entertaining. Their economic understanding lacks depth, as

they are trapped into government-led Keynesian thinking with the rest of mainstream media, but their reporting seems

free from any outward political bias.

If you enjoyed the video, spend a little time over on mises.org, and get a real economics education!