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Understanding The Big Issue

The three films Margin Call, Inside Job and The Big Short describe perfectly the scenarios around the 2008 Collapse.

Mortgage backed securities not being of true value.

Inside Job trailor:

http://www.imdb.com/title/tt1645089/

What happens if 80% of the UK mortgages have been cleared by the banks through incorrectly short cutting the process of securitisation and omitting to correctly update Land Registry legal charges and pay HMRC taxes:

https://www.gov.uk/stamp-duty-land-tax

You pay the tax when you:

  • buy a freehold property

  • buy a new or existing leasehold

  • buy a property through a shared ownership scheme

  • are transferred land or property in exchange for payment, eg you take on a mortgage or buy a share in a house

http://www.nber.org/papers/w11728

Has Financial Development Made the World Riskier?

Raghuram G. Rajan

  • NBER Working Paper No. 11728

  • Issued in November 2005

  • NBER Program(s):CF, IFM

  • Developments in the financial sector have led to an expansion in its ability to spread risks. The increase in the risk bearing capacity of economies, as well as in actual risk taking, has led to a range of financial transactions that hitherto were not possible, and has created much greater access to finance for firms and households. On net, this has made the world much better off. Concurrently, however, we have also seen the emergence of a whole range of intermediaries, whose size and appetite for risk may expand over the cycle. Not only can these intermediaries accentuate real fluctuations, they can also leave themselves exposed to certain small probability risks that their own collective behavior makes more likely. As a result, under some conditions, economies may be more exposed to financial-sector-induced turmoil than in the past. The paper discusses the implications for monetary policy and prudential supervision. In particular, it suggests market-friendly policies that would reduce the incentive of intermediary managers to take excessive risk.

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