 I'm going to talk about the multiple underlying longer-term causes of the disastrous financial crisis that we entered, and now seem in the U.S. maybe to have gotten out of, but the crisis has spread all over. There are serious problems in Europe, Ireland's in problem, Iceland's in problem, maybe Portugal, maybe Spain, maybe Greece, and all this could mean we're in the second phase of this crisis. So the first underlying cause is that financial markets just got too big. They grew bigger and bigger and bigger relative to the size of the economy, which made the economy more and more vulnerable to problems in financial markets, which history and good theories suggest to us always come up, especially if financial markets are deregulated. So what was happening after deregulation started in the 1980s was that we'd get financial bubbles, these would lead to growth, but then the bubbles would end and we'd have financial crises of various kinds. I could list a whole series of them here and overseas. The crises would normally shrink the financial markets back again because they would lose value and financial fronts would fail, but the governments stepped in to rescue the financial markets quickly and so the crashes were modest and then we started to grow again. So we got a bubble and it's the start of a problem and then the government would kick it up again and a bubble and started to kick it up again and over this time financial markets grew to be enormous. A couple of examples, private debt in the U.S. economy was 125% of gross domestic product in 1980, but by 2008 it was 300% of gross domestic product. Enormous debts relative to the economy. Big U.S. banks became gigantic and began to have monopoly or oligopoly control over markets. The share of financial corporations in total corporate profits was 10% in 1980 and that's what it was for several decades, but by 2006 it got to be 44%. So financial corporations were actually sucking up 44% of all corporate profits. So when they were lending to the most profitable user, they were really lending to themselves and this wasn't good for the economy. So the whole system got to be so big it was draining resources from the real sector. The smartest people wanted to go and be investment bankers on Wall Street. When they got into trouble the government had to rescue them now because they were gigantic and would crush the U.S. economy. It was a kind of structural blackmail. A second problem was the financial markets got too risky. They used to be small, safe and boring, but now they got to be really complicated gambling casinos. So for example, they held mortgage-backed securities which were extremely risky and they also borrowed too much money. Now why would they borrow money? Well let's suppose you're a bank and you want to buy $100 worth of securities of some kind and let's suppose the securities pay you 5% a year so you make $5, that's a 5% return on your own money. But suppose you borrow another $900. Now you have $100 worth of securities and the return is $50. So now your original return on your own investment was 5% and now it's 50%. So if you take increasing risks you make increasing returns until a crisis comes and the top people in your firm make increasingly high bonuses. Now the government rescuing the financial system after each set of problems created what economists call moral hazard, the bankers began to believe that they didn't have to worry about the downturns because the government would stop them and they could take the risk and just get the upturns and become rich in the process. The largest increase in indebtedness in the country was not in the government sector or the business sector or the household sector, it was in the financial sector itself. Financial firms held 20%, their debt was 20% of GDP in 1980 and it grew to be 120% in 2008 that left them very vulnerable. So if the securities that they held started to lose value they didn't have much of an equity cushion, it was mostly debt and they could be threatened with insolvency. The whole system was kind of new and more complicated, more dangerous and more risky through innovation. Banks used to sell mortgages directly to people. You know you'd come in and you'd need a mortgage, the bank would sell you the mortgage for your house if it was secure, then they would hold the mortgage till its conclusion because they were going to hold your mortgage, they made pretty sure that it was a safe loan for them. But after the 1980s, banks began to securitize their mortgages, securitization is a term. They would get out mortgages but they would bundle thousands of them into a big complicated security, a mortgage backed security and they would sell that off to somebody else to a pension fund, an insurance company, a mutual fund. And so they didn't have to worry about what would happen if the mortgages weren't paid or whatever because they weren't holding them, so that meant that they could make money by even making very risky mortgages, subprime mortgages because they were going to package them together and they would sell them off to the capital markets to somebody else. So they were providing through these mortgage backed securities, they make a loan to you, they package it, they sell it off into the market, the market gives the money for that, they make a loan to somebody else, so they could make more mortgages, they could give cheaper mortgages, riskier mortgages because they weren't going to hold them. This created a big bubble in these mortgage backed securities and the mortgage backed securities began to be held all over the country and all over the world and when the problems came in the US housing market and then the mortgage market, these securities weren't worth what people thought they were worth, banks began to be threatened with insolvency and began to sell off these mortgages and not loaned to anybody else and we began the beginning of this financial crisis.