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What is Leverage?

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Uploaded by on Nov 14, 2008

NJIT Professor Michael Ehrlich explains what leverage really is and whether or not it's good or bad.

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Education

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This video is a response to Crisis on Wall Street
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  • i wish you were my professor ! you rock i got it thanks

  • @artyfarty3 it seems to me that "leverage" is a good thing only when you have a 100% certainty of your investment making a profit - other ways it's just a HIGHWAY to bankruptcy ;)

    am i correct ?

  • ... so , if IMF wants to leverage money they borrowed from other countries - where would they get the "leverage" money from ? - and if then IMF were to lend some of it to ie: Greece and then Greece could not pay it back , how would IMF pay it back to it's investors ?

    I'm not sure if i understand it correctly , but it seems a bit silly of IMF to leverage any loans - especially when there is no guarantee that Greece will ever pay it back .

  • Thanks for explaining. It was easy to understand.

  • as always, very straight forward explanation and very easy to understand what happened to all these big banks like LB and BS. Thanks professor for a great 2 min lecture :)

  • as always, very straight forward explanation and very easy to understand what happened to all these big banks like LB and BS. Thanks professor for a great 2 min video :)

  • as always, very straight forward explanation and very easy to understand what happened to all these big banks like LB and BS. Thanks professor.

  • thank you, very clea explanation.

  • Is the leverage ratio likely to be regulated since the crash? Can we set an upper limit that reduces the likelyhood of a meltdown or public rescue without causing some of these firms to go under?

    Is this not a huge scam to transfer public wealth into bankers hands through bonuses in the good times and bail outs in the bad- amplified by the banks leverage factor?

  • very good explination thanks

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