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Explain The Savings Borrowing Investing Cycle – Leveraging and deleveraging

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Explain The Savings Borrowing Investing Cycle – Review

Leveraging or borrowing has been cited as one of the contributors to the financial crisis. Senior Editor Paddy Hirsch explains how the move to deleverage or reduce debt is prompting wild market swings and concerns about deflation. #MarketplaceAPM #DebtReduction #EconomicExplainers

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47 Comments

  1. Hoang Viet Nguyen
    July 31, 2021 at 12:51 am

    "End up with something flaccid and useless." That's what she said.

  2. Finance ABC’s
    July 31, 2021 at 12:51 am

    Agree that Banks can borrow 25:1 because the FDIC guarantees deposits. Corporations (Commercial and Industrial) cannot borrow more than 1:1; you say 5:1. I say that is too much, with the possible exception of commercial real estate loans. 😎

  3. family tran
    July 31, 2021 at 12:51 am

    Thank you for this video. You are great teacher.

  4. Darse Zhang
    July 31, 2021 at 12:51 am

    CDOs!I love his facial expression

  5. Scott Wijayatilake
    July 31, 2021 at 12:51 am

    Algorithm back at it again

  6. Brett Unger
    July 31, 2021 at 12:51 am

    Very understandable…..very charismatic….✌🏼

  7. Yashpreet Singh
    July 31, 2021 at 12:51 am

    What if there was a condom instead of a balloon?

  8. Alex Nauth
    July 31, 2021 at 12:51 am

    I think this has never been more applicable, the market is especially unpredictable and this may be a leading cause

  9. Kwesi Ennison
    July 31, 2021 at 12:51 am

    Very good analogy.

  10. Nachannachle
    July 31, 2021 at 12:51 am

    Funny man you are.
    You didn't mention the other option for deleveraging: Printing money to devalue the debt and raise asset prices…so that the company can go for further rounds of leveraging.

  11. Curt Kautsch
    July 31, 2021 at 12:51 am

    interesting to watch this nearly 12 years later. Our countries balloon is severely strained. Enters: COVID-19 "POP"

  12. Mike H
    July 31, 2021 at 12:51 am

    Thanks! Well it's March 19, 2020, and we're two weeks into the Covid19 Crash! The PIN has hit the almost everything balloon! Blood on the streets!

  13. Rio Santo
    July 31, 2021 at 12:51 am

    Excellent video. But what's happening is that excessive leverage, easy credit and easy money are inflating Capitalism. The system is begging to cleanse itself from all these leveragings and excesses and eventually it will, with a huge contraction. Leveraging, easy credit and the abundance of printed monies by central banks have created a huge disequilibrium. Good luck to central banks in their irrational efforts to keep that disequilibrium going and the good times rolling.

  14. BC 2020
    July 31, 2021 at 12:51 am

    👍👍

  15. Baldev Dhingra
    July 31, 2021 at 12:51 am

    He deserves two drinks.Great explanation of economy.

  16. awsaf ABDUN-NUR
    July 31, 2021 at 12:51 am

    a ballon= a big bang theory . so we can use big bang theory in economics

  17. money investment
    July 31, 2021 at 12:51 am

    Great video. Very well explained. Is corporate debt (ah I mean leverage) a problem these days (summer/fall 2019)? Although the debt is high many experts say it is not a problem.
    Maybe it is not a problem now when the earnings are still high but once recession kicks in it might become a problem. Any thoughts on it with respect to the current situation?

  18. Gileno Araujo Filho
    July 31, 2021 at 12:51 am

    How does hedge funds can get 25x more leverage ?

  19. Crypto Bacon
    July 31, 2021 at 12:51 am

    The solution is bitcoin!

  20. Shawn Marsh
    July 31, 2021 at 12:51 am

    GREAT ILLUSTRATION……….AKA internet bubble theory !

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    July 31, 2021 at 12:51 am

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    July 31, 2021 at 12:51 am

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  23. Drum Ape
    July 31, 2021 at 12:51 am

    So in the end the tax payers were the ones blowing lol Thanks for the explanation!

  24. Lew Huey Wen
    July 31, 2021 at 12:51 am

    Amazing. the balloon had helped to me to understand intuitively. thanks!

  25. Johnny Cash Flow
    July 31, 2021 at 12:51 am

    Every lesson ends with everyone needing a drink. Exactly how I feel every time I read or learn about finance; cheers!

  26. Ekanem
    July 31, 2021 at 12:51 am

    Great video but @8:02, is that what she said bro? haha

  27. sky 1187
    July 31, 2021 at 12:51 am

    This guy's is awesome. I love that he's a great teacher. I actually have a better understanding

  28. Ronaly van der Biest
    July 31, 2021 at 12:51 am

    Very well explained!
    Thnx!

  29. Andre Quina
    July 31, 2021 at 12:51 am

    Great videos, great way to pass on knowledge. Give this man a drink!

  30. Pils Nrimgaard
    July 31, 2021 at 12:51 am

    Is this dude an alcoholic? It always seems to end with a drink. Good stuff though.

  31. fredsk877
    July 31, 2021 at 12:51 am

    thanks for the info! dumb beginner question but am I understanding this correctly?…. If I were to open a position with 100 dollars for instance, and I have 10:1 leverage, it means I am trading with 1000 dollars – so if I invest this in a stock because I think the value will go up (and it does) all I have to do is close the position, the broker gets their investment back and I make more profit than I would have done if I hadn't used leverage. What happens if I open a position with the same investment/leverage and the stock price drops dramatically? Could I potentially end up loosing an entire 1000 dollars, even though I only invested 100 dollars of my own money? If the share price dropped to almost nothing, could I not wait until the share price goes back up again before paying my broker back? Are there deadlines for returning the broker's money? If anyone could let me know, it would be greatly appreciated!

  32. SM
    July 31, 2021 at 12:51 am

    Thank you for making these videos- they are really great! Keep up the good work

  33. Ankur Verma
    July 31, 2021 at 12:51 am

    Awesome

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    July 31, 2021 at 12:51 am

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  35. rcdny
    July 31, 2021 at 12:51 am

    learn ABCT. read mises.org

  36. Ace
    July 31, 2021 at 12:51 am

    Great explanation, thank you ! 🙂

  37. equity research analyst
    July 31, 2021 at 12:51 am

    vey nice explanation 

  38. Smriti Sinha
    July 31, 2021 at 12:51 am

    The balloon was simply superb! Very well explained. 

  39. Rahul Patel
    July 31, 2021 at 12:51 am

    Nice explanation sir. Thank you. Regards from India 🙂

  40. Avi Tiwarii
    July 31, 2021 at 12:51 am

    nice explanation

  41. SuperGogetem
    July 31, 2021 at 12:51 am

    Wouldn't the sovereign bond market be represented as a massive balloon just ready to pop if interest rates go up even a bit?

  42. nafism6969
    July 31, 2021 at 12:51 am

    You tube could have saved me from paying 20 grand for uni!

  43. echo voodoo
    July 31, 2021 at 12:51 am

    'cause you can't drop out of You Tube.

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    July 31, 2021 at 12:51 am

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  45. Addisu Hailu
    July 31, 2021 at 12:51 am

    thanks very good explanation //txs

  46. wjestick
    July 31, 2021 at 12:51 am

    Leverage is a problem, when the lender can create debt without adding value.
    When banks can create money out of thin air through fractional reserve, then debt can exceed the total assets in existence.

    Then the debts become un-payable and de-leveraging produces terminal deflation.

    If you understood where money came from you would cut down on the ignorant comments

  47. wjestick
    July 31, 2021 at 12:51 am

    You attempt to sound smart highlights your ignorance.
    Leveraging is only benign if it is capitalised. Our banking system employs fractional reserve, so leverage is inflationary. This inflation is wealth confiscation.

    The financial system is debt based, so deleveraging is not only deflationary, it shrinks the economy.

    When the whole western world has fallen into the same trap, assuming they are all idiots is well… idiotic.