[Script Info]
Title: 
[Events]
Format: Layer, Start, End, Style, Name, MarginL, MarginR, MarginV, Effect, Text
Dialogue: 0,0:00:00.95,0:00:02.32,Default,,0000,0000,0000,,Zermatt Summit
Dialogue: 0,0:00:02.32,0:00:04.03,Default,,0000,0000,0000,,Changing hearts and minds
Dialogue: 0,0:00:04.03,0:00:05.86,Default,,0000,0000,0000,,Humanizing Globalisation
Dialogue: 0,0:00:08.06,0:00:11.09,Default,,0000,0000,0000,,Now Paul Jorion will come up and speak.
Dialogue: 0,0:00:11.09,0:00:16.23,Default,,0000,0000,0000,,Paul is by initial training a social anthropologist,
Dialogue: 0,0:00:16.23,0:00:20.19,Default,,0000,0000,0000,,but he moved from social anthropology to finance.
Dialogue: 0,0:00:20.19,0:00:23.25,Default,,0000,0000,0000,,and he tells me that there was no great transition,
Dialogue: 0,0:00:23.25,0:00:25.39,Default,,0000,0000,0000,,because at the time he made the transition
Dialogue: 0,0:00:25.39,0:00:28.62,Default,,0000,0000,0000,,he was working on artificial intelligence.
Dialogue: 0,0:00:29.02,0:00:32.54,Default,,0000,0000,0000,,So perhaps we will have a bit of natural intelligence,
Dialogue: 0,0:00:32.54,0:00:34.57,Default,,0000,0000,0000,,as well as artificial intelligence,
Dialogue: 0,0:00:34.57,0:00:36.71,Default,,0000,0000,0000,,as we got through your presentation.
Dialogue: 0,0:00:36.97,0:00:39.63,Default,,0000,0000,0000,,May I ask you please to welcome Paul Jorion
Dialogue: 0,0:00:39.63,0:00:44.30,Default,,0000,0000,0000,,[applause]
Dialogue: 0,0:00:45.29,0:00:50.06,Default,,0000,0000,0000,,I was blessed by the most inspirational introduction.
Dialogue: 0,0:00:50.06,0:00:53.12,Default,,0000,0000,0000,,Preparing my little presentation,
Dialogue: 0,0:00:53.12,0:00:55.98,Default,,0000,0000,0000,,I though Let's try to make something good.
Dialogue: 0,0:00:55.98,0:01:00.57,Default,,0000,0000,0000,,But after having watched Malika, and listened to Elisabeth,
Dialogue: 0,0:01:00.57,0:01:02.55,Default,,0000,0000,0000,,what crosses my mind is:
Dialogue: 0,0:01:02.55,0:01:05.58,Default,,0000,0000,0000,,Let's try and make it even better.
Dialogue: 0,0:01:07.18,0:01:13.37,Default,,0000,0000,0000,,I worked from 1999 to 2002 for a company called Indymac.
Dialogue: 0,0:01:13.37,0:01:17.24,Default,,0000,0000,0000,,Indymac had a specialty of homeloans, as we call them,
Dialogue: 0,0:01:17.24,0:01:22.94,Default,,0000,0000,0000,,and it's more usually called mortgages.
Dialogue: 0,0:01:22.94,0:01:24.67,Default,,0000,0000,0000,,Indymac had 2 specialties:
Dialogue: 0,0:01:24.67,0:01:28.71,Default,,0000,0000,0000,,Reverse Mortgages where the person who has the mortgage
Dialogue: 0,0:01:28.71,0:01:30.52,Default,,0000,0000,0000,,is the owner of the house
Dialogue: 0,0:01:30.52,0:01:35.83,Default,,0000,0000,0000,,and little by little, the house goes back to the bank.
Dialogue: 0,0:01:35.83,0:01:40.92,Default,,0000,0000,0000,,The other one was called Alt A (Alternative A).
Dialogue: 0,0:01:40.92,0:01:44.74,Default,,0000,0000,0000,,I won't be going into any details,
Dialogue: 0,0:01:44.74,0:01:49.35,Default,,0000,0000,0000,,but Alt A is just one notch above Subprime.
Dialogue: 0,0:01:49.35,0:01:53.57,Default,,0000,0000,0000,,Indymac was the third major bank run
Dialogue: 0,0:01:53.57,0:01:56.22,Default,,0000,0000,0000,,in the history of American finance.
Dialogue: 0,0:01:56.22,0:01:59.20,Default,,0000,0000,0000,,A bank run is when people start lining up in the streets
Dialogue: 0,0:01:59.20,0:02:03.14,Default,,0000,0000,0000,,asking for their money to be returned to them.
Dialogue: 0,0:02:03.14,0:02:07.22,Default,,0000,0000,0000,,That happened all in July 2008, on a Thursday.
Dialogue: 0,0:02:07.22,0:02:11.24,Default,,0000,0000,0000,,Things got worse on the Friday.
Dialogue: 0,0:02:11.24,0:02:14.71,Default,,0000,0000,0000,,On the Monday, the bank re-opened.
Dialogue: 0,0:02:14.71,0:02:18.39,Default,,0000,0000,0000,,It was previously called Indymac bank,
Dialogue: 0,0:02:18.39,0:02:22.38,Default,,0000,0000,0000,,and on the main entrance,
Dialogue: 0,0:02:22.38,0:02:25.15,Default,,0000,0000,0000,,there was a banner now between the two words,
Dialogue: 0,0:02:25.15,0:02:27.52,Default,,0000,0000,0000,,It was Indymac Federal Bank.
Dialogue: 0,0:02:27.52,0:02:31.72,Default,,0000,0000,0000,,The FDIC had taken over the bank in the name of the American government,
Dialogue: 0,0:02:31.72,0:02:36.70,Default,,0000,0000,0000,,and it was from now belonging to the American government.
Dialogue: 0,0:02:37.98,0:02:41.93,Default,,0000,0000,0000,,From 2002 to 2004, I worked for Wells Fargo.
Dialogue: 0,0:02:41.93,0:02:45.18,Default,,0000,0000,0000,,Wells Fargo is a well-known bank in San Francisco.
Dialogue: 0,0:02:45.18,0:02:46.90,Default,,0000,0000,0000,,And it's doing well,
Dialogue: 0,0:02:46.90,0:02:50.01,Default,,0000,0000,0000,,fortunately for its business, it's doing very well.
Dialogue: 0,0:02:50.01,0:02:53.79,Default,,0000,0000,0000,,I was working in what was called "Consumer Credit".
Dialogue: 0,0:02:53.79,0:02:56.90,Default,,0000,0000,0000,,And what was Consumer Credit was doing was essentially...
Dialogue: 0,0:02:57.24,0:03:00.58,Default,,0000,0000,0000,,[A microphone issue needs to be fixed.]
Dialogue: 0,0:03:01.94,0:03:04.47,Default,,0000,0000,0000,,- Just give me a second.
Dialogue: 0,0:03:05.07,0:03:06.12,Default,,0000,0000,0000,,Try it on.
Dialogue: 0,0:03:08.71,0:03:09.82,Default,,0000,0000,0000,,- Louder?
Dialogue: 0,0:03:10.28,0:03:13.11,Default,,0000,0000,0000,,Alright ok.
Dialogue: 0,0:03:15.08,0:03:19.61,Default,,0000,0000,0000,,In 2002, I moved working for Wells Fargo,
Dialogue: 0,0:03:19.61,0:03:22.68,Default,,0000,0000,0000,,which as I said is still a major bank.
Dialogue: 0,0:03:22.68,0:03:26.89,Default,,0000,0000,0000,,I was working in a division which is called 'Consumer Credit'.
Dialogue: 0,0:03:26.89,0:03:29.41,Default,,0000,0000,0000,,and our specialty was called HELOC.
Dialogue: 0,0:03:29.41,0:03:33.65,Default,,0000,0000,0000,,HELOC stands for Home Equity Line Of Credit.
Dialogue: 0,0:03:33.65,0:03:36.56,Default,,0000,0000,0000,,And essentially, on home, if you're not familiar with that,
Dialogue: 0,0:03:36.56,0:03:38.90,Default,,0000,0000,0000,,it's a second lean as we called it,
Dialogue: 0,0:03:38.90,0:03:41.91,Default,,0000,0000,0000,,a second mortgage that you can get on a house.
Dialogue: 0,0:03:41.91,0:03:44.78,Default,,0000,0000,0000,,The difficulty with the second mortgage is that
Dialogue: 0,0:03:44.78,0:03:46.68,Default,,0000,0000,0000,,the first one comes first,
Dialogue: 0,0:03:46.68,0:03:48.02,Default,,0000,0000,0000,,that's why it's called the first lean.
Dialogue: 0,0:03:48.02,0:03:51.82,Default,,0000,0000,0000,,So when things turned sorer, in 2008,
Dialogue: 0,0:03:51.82,0:03:56.97,Default,,0000,0000,0000,,what happened is that HELOC had no value whatever.
Dialogue: 0,0:03:57.26,0:04:03.34,Default,,0000,0000,0000,,People hired up on HELOC as I was had lost rapidely their jobs.
Dialogue: 0,0:04:03.85,0:04:08.76,Default,,0000,0000,0000,,From 2005 to 2007, I worked for CountryWide.
Dialogue: 0,0:04:08.76,0:04:12.70,Default,,0000,0000,0000,,CountryWide as you know is the major corporate
Dialogue: 0,0:04:12.70,0:04:16.15,Default,,0000,0000,0000,,in the disaster of the subprime industry.
Dialogue: 0,0:04:16.15,0:04:23.14,Default,,0000,0000,0000,,A number of companies did worse and they fell earlier than did CountryWide,
Dialogue: 0,0:04:23.14,0:04:25.32,Default,,0000,0000,0000,,but CountryWide is the main corporate.
Dialogue: 0,0:04:25.69,0:04:30.01,Default,,0000,0000,0000,,In 2008 it was taken over by Bank of America.
Dialogue: 0,0:04:30.70,0:04:35.23,Default,,0000,0000,0000,,So these 3 experiences made me think about finance.
Dialogue: 0,0:04:35.23,0:04:39.69,Default,,0000,0000,0000,,I imagine that you think that justifies to have come to some thoughts.
Dialogue: 0,0:04:39.69,0:04:45.98,Default,,0000,0000,0000,,It was not just on my own. We had conversations at lunchtime, between colleagues.
Dialogue: 0,0:04:45.98,0:04:49.54,Default,,0000,0000,0000,,And we though: We are running into some major disaster
Dialogue: 0,0:04:49.54,0:04:51.14,Default,,0000,0000,0000,,but what can we do?
Dialogue: 0,0:04:51.14,0:04:53.20,Default,,0000,0000,0000,,M. Greenspan, who was, as you know,
Dialogue: 0,0:04:53.20,0:04:56.24,Default,,0000,0000,0000,,Head of the Federal Reserve (the central bank of US)
Dialogue: 0,0:04:56.24,0:05:00.53,Default,,0000,0000,0000,,for nearly 20 years from 1986 to 2006,
Dialogue: 0,0:05:00.53,0:05:02.29,Default,,0000,0000,0000,,said at that time:
Dialogue: 0,0:05:02.29,0:05:08.48,Default,,0000,0000,0000,,"The head of these companies did not think of their self interest, and did not work towards it."
Dialogue: 0,0:05:08.48,0:05:12.78,Default,,0000,0000,0000,,assuming that if the head of these companies had worked for their self interest,
Dialogue: 0,0:05:12.78,0:05:18.30,Default,,0000,0000,0000,,that would have produced "auto-regulation"
Dialogue: 0,0:05:18.30,0:05:21.08,Default,,0000,0000,0000,,meaning that the system would go bad
Dialogue: 0,0:05:21.08,0:05:23.64,Default,,0000,0000,0000,,and then would recover on its own.
Dialogue: 0,0:05:23.64,0:05:26.62,Default,,0000,0000,0000,,And as you know from what you have seen in the news
Dialogue: 0,0:05:26.62,0:05:30.46,Default,,0000,0000,0000,,there's been a lot of discussions lately in 2010 and 2011
Dialogue: 0,0:05:30.46,0:05:32.82,Default,,0000,0000,0000,,about what some companies,
Dialogue: 0,0:05:32.82,0:05:38.79,Default,,0000,0000,0000,,and particularly highlighed in that respect Goldman Sachs and Deutsche Bank,
Dialogue: 0,0:05:38.79,0:05:44.01,Default,,0000,0000,0000,,that when it came to saving the whole mortgage industry
Dialogue: 0,0:05:44.01,0:05:46.58,Default,,0000,0000,0000,,or try to save their own bank,
Dialogue: 0,0:05:46.58,0:05:49.06,Default,,0000,0000,0000,,these companies chose to save their own bank
Dialogue: 0,0:05:49.06,0:05:52.89,Default,,0000,0000,0000,,even at the detriment of the whole industry.
Dialogue: 0,0:05:53.26,0:05:56.49,Default,,0000,0000,0000,,So what I started thinking at that time,
Dialogue: 0,0:05:56.49,0:05:58.54,Default,,0000,0000,0000,,and as I said, in discussions with colleagues,
Dialogue: 0,0:05:58.54,0:06:03.23,Default,,0000,0000,0000,,what can we do to prevent from within finance
Dialogue: 0,0:06:03.23,0:06:06.59,Default,,0000,0000,0000,,that such a disaster happens again.
Dialogue: 0,0:06:06.59,0:06:11.22,Default,,0000,0000,0000,,And I started thinking about different ideas.
Dialogue: 0,0:06:11.22,0:06:15.72,Default,,0000,0000,0000,,In September 2008, which is just literally
Dialogue: 0,0:06:15.72,0:06:20.42,Default,,0000,0000,0000,,one month before I got dismissed by CountryWide,
Dialogue: 0,0:06:20.42,0:06:25.28,Default,,0000,0000,0000,,I was part of the first load, the first batch of people that were let go.
Dialogue: 0,0:06:25.28,0:06:29.100,Default,,0000,0000,0000,,At that point I think about 30% of the people in the company were let go.
Dialogue: 0,0:06:29.100,0:06:36.18,Default,,0000,0000,0000,,And maybe 4 or 5 months later, the company was simply taken over by Bank of America.
Dialogue: 0,0:06:36.18,0:06:39.32,Default,,0000,0000,0000,,And I though at that time:
Dialogue: 0,0:06:39.32,0:06:41.70,Default,,0000,0000,0000,,What should we do?
Dialogue: 0,0:06:41.70,0:06:46.60,Default,,0000,0000,0000,,And one month before I was let go, I wrote a piece,
Dialogue: 0,0:06:46.60,0:06:49.80,Default,,0000,0000,0000,,an opinion piece for the French daily "Le Monde".
Dialogue: 0,0:06:49.80,0:06:53.69,Default,,0000,0000,0000,,I called that piece "A Constitution for the Economy".
Dialogue: 0,0:06:53.69,0:06:59.53,Default,,0000,0000,0000,,My idea was that we needed to find an exit out of the situation.
Dialogue: 0,0:06:59.53,0:07:03.40,Default,,0000,0000,0000,,Let say at the highest possible level.
Dialogue: 0,0:07:03.40,0:07:05.48,Default,,0000,0000,0000,,Let me here pause a little
Dialogue: 0,0:07:05.48,0:07:09.23,Default,,0000,0000,0000,,to tell you exactly what I started thinking about.
Dialogue: 0,0:07:10.53,0:07:13.40,Default,,0000,0000,0000,,A long time ago,
Dialogue: 0,0:07:13.40,0:07:16.81,Default,,0000,0000,0000,,a person who is historical,
Dialogue: 0,0:07:16.81,0:07:20.67,Default,,0000,0000,0000,,or maybe he's not... but anyway, the stories are beautiful,
Dialogue: 0,0:07:20.67,0:07:24.12,Default,,0000,0000,0000,,a person called Moses came down from the Mount,
Dialogue: 0,0:07:24.12,0:07:27.82,Default,,0000,0000,0000,,and he was holding the Tables of the Law.
Dialogue: 0,0:07:27.82,0:07:33.62,Default,,0000,0000,0000,,And I'll just take one of the 10 commandments of these Tables of the Law:
Dialogue: 0,0:07:33.62,0:07:35.05,Default,,0000,0000,0000,,“Thou shalt not kill"
Dialogue: 0,0:07:35.86,0:07:37.35,Default,,0000,0000,0000,,To hook up what I'm saying
Dialogue: 0,0:07:37.35,0:07:40.03,Default,,0000,0000,0000,,with some earlier discussions today,
Dialogue: 0,0:07:40.03,0:07:43.10,Default,,0000,0000,0000,,there was an alternative here:
Dialogue: 0,0:07:43.10,0:07:48.100,Default,,0000,0000,0000,,The first alternative was to wait patiently for people to reform themselves,
Dialogue: 0,0:07:48.100,0:07:53.45,Default,,0000,0000,0000,,unless there was no danger anymore that anybody would ever be tempted
Dialogue: 0,0:07:53.45,0:07:58.13,Default,,0000,0000,0000,,to murder his neighbour or part of his family or whatever...
Dialogue: 0,0:07:58.13,0:08:03.32,Default,,0000,0000,0000,,Or, there was the alternative of maybe having a prohibition about it.
Dialogue: 0,0:08:03.32,0:08:05.86,Default,,0000,0000,0000,,Personally I think that the idea of Moses,
Dialogue: 0,0:08:05.86,0:08:09.00,Default,,0000,0000,0000,,or God if he was directly inspired by God,
Dialogue: 0,0:08:09.00,0:08:10.58,Default,,0000,0000,0000,,I think it was a great idea.
Dialogue: 0,0:08:10.58,0:08:13.73,Default,,0000,0000,0000,,I think we really saved a lot of time.
Dialogue: 0,0:08:14.04,0:08:17.16,Default,,0000,0000,0000,,A little other historical anecdote,
Dialogue: 0,0:08:17.16,0:08:21.08,Default,,0000,0000,0000,,during the French revolution in 1792,
Dialogue: 0,0:08:21.08,0:08:23.18,Default,,0000,0000,0000,,a person called Saint-Just,
Dialogue: 0,0:08:23.18,0:08:26.40,Default,,0000,0000,0000,,one historical figure in the French revolution,
Dialogue: 0,0:08:26.40,0:08:28.91,Default,,0000,0000,0000,,came up with the idea at some point.
Dialogue: 0,0:08:28.91,0:08:32.52,Default,,0000,0000,0000,,In 1792, it was the worse of the French revolution,
Dialogue: 0,0:08:32.52,0:08:36.16,Default,,0000,0000,0000,,there was a civil war in France, nearly everywhere,
Dialogue: 0,0:08:36.16,0:08:37.92,Default,,0000,0000,0000,,in Nantes, in Lyon.
Dialogue: 0,0:08:37.92,0:08:42.68,Default,,0000,0000,0000,,There were external wars on all the borders of the country.
Dialogue: 0,0:08:42.68,0:08:46.61,Default,,0000,0000,0000,,And Saint-Just had prepared a speech, where he said:
Dialogue: 0,0:08:46.61,0:08:50.03,Default,,0000,0000,0000,,"What we need to do is to reform the individuals
Dialogue: 0,0:08:50.03,0:08:54.81,Default,,0000,0000,0000,,(which was essentially the line that had been taken by the French revolution until then),
Dialogue: 0,0:08:54.81,0:09:00.18,Default,,0000,0000,0000,,but at the same time, we have to do that in parallel with changing the institutions".
Dialogue: 0,0:09:00.18,0:09:01.32,Default,,0000,0000,0000,,He started speaking.
Dialogue: 0,0:09:01.32,0:09:02.66,Default,,0000,0000,0000,,He was booed.
Dialogue: 0,0:09:02.66,0:09:05.65,Default,,0000,0000,0000,,It was the end of Robespierre, who was his friend,
Dialogue: 0,0:09:05.65,0:09:08.20,Default,,0000,0000,0000,,it was finished: he never read this particular piece.
Dialogue: 0,0:09:08.20,0:09:09.95,Default,,0000,0000,0000,,He was arrested on the following day,
Dialogue: 0,0:09:09.95,0:09:12.54,Default,,0000,0000,0000,,and he was decapitated a couple of days later.
Dialogue: 0,0:09:12.54,0:09:16.08,Default,,0000,0000,0000,,The idea was essential but it came pretty late.
Dialogue: 0,0:09:16.45,0:09:18.88,Default,,0000,0000,0000,,So what I was thinking was the following:
Dialogue: 0,0:09:18.88,0:09:22.28,Default,,0000,0000,0000,,Finance is extremely useful.
Dialogue: 0,0:09:22.28,0:09:25.100,Default,,0000,0000,0000,,It provides the bloodstream of the economy.
Dialogue: 0,0:09:25.100,0:09:29.02,Default,,0000,0000,0000,,It has 2 functions which are essential:
Dialogue: 0,0:09:29.02,0:09:33.16,Default,,0000,0000,0000,,one that we call 'Price Discovery' which is essentially
Dialogue: 0,0:09:33.16,0:09:38.78,Default,,0000,0000,0000,,finding people who need money in order to start a business, do something,
Dialogue: 0,0:09:38.78,0:09:42.66,Default,,0000,0000,0000,,or even sometimes just to consume, and bring these people together
Dialogue: 0,0:09:42.66,0:09:48.51,Default,,0000,0000,0000,,with other people who have some capital they can dispense of for a period of time,
Dialogue: 0,0:09:48.51,0:09:50.92,Default,,0000,0000,0000,,make these people meet,
Dialogue: 0,0:09:50.92,0:09:52.60,Default,,0000,0000,0000,,make it possible to work that way.
Dialogue: 0,0:09:52.60,0:09:59.07,Default,,0000,0000,0000,,Another function which is essential for finance is the insurance principle.
Dialogue: 0,0:09:59.07,0:10:03.76,Default,,0000,0000,0000,,A large institution like a bank can actually dump
Dialogue: 0,0:10:03.76,0:10:06.77,Default,,0000,0000,0000,,the individual shocks of some little drama
Dialogue: 0,0:10:06.77,0:10:09.16,Default,,0000,0000,0000,,happening here and there,
Dialogue: 0,0:10:09.16,0:10:11.20,Default,,0000,0000,0000,,and paying a premium,
Dialogue: 0,0:10:11.20,0:10:14.74,Default,,0000,0000,0000,,you can actually spread that risk over the whole system.
Dialogue: 0,0:10:14.74,0:10:16.01,Default,,0000,0000,0000,,These are essential.
Dialogue: 0,0:10:16.01,0:10:20.33,Default,,0000,0000,0000,,But there are other parts in finance that went really wrong.
Dialogue: 0,0:10:20.33,0:10:24.40,Default,,0000,0000,0000,,So what I was thinking is not like some people say:
Dialogue: 0,0:10:24.40,0:10:26.40,Default,,0000,0000,0000,,"Let's close all stock exchanges."
Dialogue: 0,0:10:26.40,0:10:33.16,Default,,0000,0000,0000,,or "Let's eliminate all derivatives." (which are particularly useful financial instruments).
Dialogue: 0,0:10:33.16,0:10:37.52,Default,,0000,0000,0000,,or "Let's tax every possible financial transaction".
Dialogue: 0,0:10:37.52,0:10:39.52,Default,,0000,0000,0000,,I was thinking of something more specific.
Dialogue: 0,0:10:39.52,0:10:42.72,Default,,0000,0000,0000,,Let's find a way to carve out very delicately,
Dialogue: 0,0:10:42.72,0:10:45.100,Default,,0000,0000,0000,,Let's carve out exactly the part which is
Dialogue: 0,0:10:45.100,0:10:49.24,Default,,0000,0000,0000,,useless and dangerous
Dialogue: 0,0:10:49.24,0:10:51.69,Default,,0000,0000,0000,,and remove that part from the rest.
Dialogue: 0,0:10:51.69,0:10:54.49,Default,,0000,0000,0000,,What makes this part in finance dangerous?
Dialogue: 0,0:10:54.49,0:10:57.48,Default,,0000,0000,0000,,One is what we call systemic risk.
Dialogue: 0,0:10:57.48,0:11:01.86,Default,,0000,0000,0000,,Systemic risk is the fragility of the whole system.
Dialogue: 0,0:11:01.86,0:11:05.79,Default,,0000,0000,0000,,Making the contagion effects multiplied
Dialogue: 0,0:11:05.79,0:11:12.27,Default,,0000,0000,0000,,and not enhanced by the whole way the system works.
Dialogue: 0,0:11:12.27,0:11:16.03,Default,,0000,0000,0000,,The other danger is the following
Dialogue: 0,0:11:16.03,0:11:18.84,Default,,0000,0000,0000,,and here I'll give you an example.
Dialogue: 0,0:11:18.84,0:11:25.28,Default,,0000,0000,0000,,This example will explain exactly what I've got in mind.
Dialogue: 0,0:11:25.28,0:11:30.01,Default,,0000,0000,0000,,In 2008 in the first half of the year,
Dialogue: 0,0:11:30.01,0:11:32.34,Default,,0000,0000,0000,,at the very beginning of the period,
Dialogue: 0,0:11:32.35,0:11:37.76,Default,,0000,0000,0000,,the price of a barrel of oil was $45.
Dialogue: 0,0:11:37.76,0:11:43.72,Default,,0000,0000,0000,,On the 1st of July, it hit during one particular day, $147.
Dialogue: 0,0:11:43.72,0:11:46.95,Default,,0000,0000,0000,,That was more than treble the price.
Dialogue: 0,0:11:46.97,0:11:49.73,Default,,0000,0000,0000,,There was a major crisis.
Dialogue: 0,0:11:49.73,0:11:53.41,Default,,0000,0000,0000,,Nobody much in American Government bothered except one party.
Dialogue: 0,0:11:53.41,0:11:56.53,Default,,0000,0000,0000,,And that party asked for an investigation to be started.
Dialogue: 0,0:11:56.53,0:11:59.14,Default,,0000,0000,0000,,That party, and it's a bit surprising if I tell you,
Dialogue: 0,0:11:59.14,0:12:01.72,Default,,0000,0000,0000,,it was the Pentagone. Why was it the Pentagone?
Dialogue: 0,0:12:01.72,0:12:04.37,Default,,0000,0000,0000,,Because the Pentagone had to make reserves of fuel
Dialogue: 0,0:12:04.37,0:12:06.90,Default,,0000,0000,0000,,for the boats, for the planes, etc.
Dialogue: 0,0:12:06.90,0:12:10.53,Default,,0000,0000,0000,,and the Pentagone wanted to find out what happened.
Dialogue: 0,0:12:10.53,0:12:13.17,Default,,0000,0000,0000,,Investigation found out who were the corporates.
Dialogue: 0,0:12:13.17,0:12:16.99,Default,,0000,0000,0000,,The corporates were not dark people in dark clothes...
Dialogue: 0,0:12:16.99,0:12:19.03,Default,,0000,0000,0000,,They were pension funds.
Dialogue: 0,0:12:19.03,0:12:21.74,Default,,0000,0000,0000,,They were deans from universities.
Dialogue: 0,0:12:21.74,0:12:23.65,Default,,0000,0000,0000,,They were hospitals.
Dialogue: 0,0:12:23.66,0:12:25.40,Default,,0000,0000,0000,,They were museums.
Dialogue: 0,0:12:25.40,0:12:30.02,Default,,0000,0000,0000,,Why did they go into that business of going into the market
Dialogue: 0,0:12:30.02,0:12:32.75,Default,,0000,0000,0000,,and making all these price being lifted?
Dialogue: 0,0:12:32.75,0:12:34.75,Default,,0000,0000,0000,,Because they feared for the dollar.
Dialogue: 0,0:12:34.75,0:12:36.48,Default,,0000,0000,0000,,They had some assets,
Dialogue: 0,0:12:36.48,0:12:39.70,Default,,0000,0000,0000,,they feared that the value of these assets would depreciate.
Dialogue: 0,0:12:39.70,0:12:42.63,Default,,0000,0000,0000,,So they moved in massively into the markets.
Dialogue: 0,0:12:42.63,0:12:46.76,Default,,0000,0000,0000,,And the instruments which helped them doing that were of a special nature.
Dialogue: 0,0:12:46.76,0:12:48.30,Default,,0000,0000,0000,,They are called baskets.
Dialogue: 0,0:12:48.30,0:12:49.45,Default,,0000,0000,0000,,Baskets why?
Dialogue: 0,0:12:49.45,0:12:51.84,Default,,0000,0000,0000,,Because it's not only oil you find
Dialogue: 0,0:12:51.84,0:12:54.61,Default,,0000,0000,0000,,that you can buy in that particular perspective.
Dialogue: 0,0:12:54.61,0:12:56.76,Default,,0000,0000,0000,,They make baskets, meaning that they add:
Dialogue: 0,0:12:56.76,0:12:58.66,Default,,0000,0000,0000,,metals, like copper,
Dialogue: 0,0:12:58.66,0:13:00.40,Default,,0000,0000,0000,,there's some food,
Dialogue: 0,0:13:00.40,0:13:03.84,Default,,0000,0000,0000,,there are cereals like wheat,
Dialogue: 0,0:13:03.84,0:13:04.100,Default,,0000,0000,0000,,there's coco,
Dialogue: 0,0:13:04.100,0:13:06.32,Default,,0000,0000,0000,,there's coffee,
Dialogue: 0,0:13:06.32,0:13:07.16,Default,,0000,0000,0000,,there's cotton,
Dialogue: 0,0:13:07.16,0:13:09.81,Default,,0000,0000,0000,,whatever you want to think of.
Dialogue: 0,0:13:09.81,0:13:12.08,Default,,0000,0000,0000,,And when the price of oil was lifted,
Dialogue: 0,0:13:12.08,0:13:15.84,Default,,0000,0000,0000,,the price of all these commodities was going up simultaneously.
Dialogue: 0,0:13:15.84,0:13:18.84,Default,,0000,0000,0000,,Why? Because people would buy these baskets.
Dialogue: 0,0:13:18.84,0:13:21.31,Default,,0000,0000,0000,,What did it lead to in summer 2008?
Dialogue: 0,0:13:21.31,0:13:25.35,Default,,0000,0000,0000,,That lead to some anger driven riots
Dialogue: 0,0:13:25.35,0:13:28.37,Default,,0000,0000,0000,,in some countries in the world:
Dialogue: 0,0:13:28.37,0:13:33.44,Default,,0000,0000,0000,,in Indonesia, in Haiti, in some parts of Africa, and so on.
Dialogue: 0,0:13:34.63,0:13:39.06,Default,,0000,0000,0000,,When the Senate Commitee hold these people to explain what was going on,
Dialogue: 0,0:13:39.06,0:13:41.01,Default,,0000,0000,0000,,they moved out of these markets. Why?
Dialogue: 0,0:13:41.01,0:13:42.26,Default,,0000,0000,0000,,Because of the stigma.
Dialogue: 0,0:13:42.26,0:13:44.29,Default,,0000,0000,0000,,They didn't want to be in the limelight.
Dialogue: 0,0:13:44.29,0:13:47.95,Default,,0000,0000,0000,,They didn't want to be called there to testify about what was going on.
Dialogue: 0,0:13:47.95,0:13:49.65,Default,,0000,0000,0000,,They all moved out. What happened?
Dialogue: 0,0:13:49.65,0:13:53.09,Default,,0000,0000,0000,,All the prices dropped suddenly.
Dialogue: 0,0:13:53.09,0:13:55.68,Default,,0000,0000,0000,,They dropped so low,
Dialogue: 0,0:13:55.68,0:14:00.69,Default,,0000,0000,0000,,that in the process, the producers in Africa, of coco,
Dialogue: 0,0:14:00.69,0:14:02.94,Default,,0000,0000,0000,,the producers of coffee all over the world, etc.
Dialogue: 0,0:14:02.94,0:14:06.19,Default,,0000,0000,0000,,were hit by that. Why?
Dialogue: 0,0:14:06.19,0:14:09.46,Default,,0000,0000,0000,,Because the prices at that point were going too low.
Dialogue: 0,0:14:09.46,0:14:10.58,Default,,0000,0000,0000,,So what does that mean?
Dialogue: 0,0:14:10.58,0:14:14.18,Default,,0000,0000,0000,,It means that prices going up were killing the consumers
Dialogue: 0,0:14:14.18,0:14:16.78,Default,,0000,0000,0000,,because you and I at the filling station who were paying
Dialogue: 0,0:14:16.78,0:14:19.33,Default,,0000,0000,0000,,for the price of the fuel going up.
Dialogue: 0,0:14:19.33,0:14:24.14,Default,,0000,0000,0000,,When it comes down, it's the producers who are being hit
Dialogue: 0,0:14:24.14,0:14:25.96,Default,,0000,0000,0000,,by the process of going down.
Dialogue: 0,0:14:25.96,0:14:28.90,Default,,0000,0000,0000,,There was something even more I would say tragic
Dialogue: 0,0:14:28.90,0:14:31.28,Default,,0000,0000,0000,,in terms of what we are concerned with today
Dialogue: 0,0:14:31.28,0:14:33.09,Default,,0000,0000,0000,,in the process of coming down.
Dialogue: 0,0:14:33.09,0:14:37.22,Default,,0000,0000,0000,,When the prices of oil comes up, it's interesting financially
Dialogue: 0,0:14:37.22,0:14:41.00,Default,,0000,0000,0000,,to have startups on renewal energy.
Dialogue: 0,0:14:41.00,0:14:44.92,Default,,0000,0000,0000,,The price of oil goes up, and it becomes more interesting
Dialogue: 0,0:14:44.92,0:14:48.12,Default,,0000,0000,0000,,to go into research to see how to replace oil.
Dialogue: 0,0:14:48.12,0:14:52.93,Default,,0000,0000,0000,,When the price of oil drops suddenly back to the level of $45 from $147,
Dialogue: 0,0:14:52.93,0:14:57.21,Default,,0000,0000,0000,,a lot of these startups who were working on renewal energy were eliminated.
Dialogue: 0,0:14:57.21,0:15:01.89,Default,,0000,0000,0000,,I hope you understand what I've got in mind when I'm talking about this.
Dialogue: 0,0:15:01.89,0:15:07.19,Default,,0000,0000,0000,,What I though about what would be one of the essential, major, central principle
Dialogue: 0,0:15:07.19,0:15:09.55,Default,,0000,0000,0000,,of the idea of a Constitution of Economy.
Dialogue: 0,0:15:09.55,0:15:11.46,Default,,0000,0000,0000,,When I say Constitution of Economy,
Dialogue: 0,0:15:11.46,0:15:14.98,Default,,0000,0000,0000,,I mean indeed something that applies to the world as a whole.
Dialogue: 0,0:15:14.98,0:15:17.50,Default,,0000,0000,0000,,I think that's where we need to go.
Dialogue: 0,0:15:17.50,0:15:19.34,Default,,0000,0000,0000,,You can call it Tables of the Law,
Dialogue: 0,0:15:19.34,0:15:22.29,Default,,0000,0000,0000,,and you can think of adding an eleventh commandment
Dialogue: 0,0:15:22.29,0:15:24.22,Default,,0000,0000,0000,,or maybe a twelfth and so on...
Dialogue: 0,0:15:24.22,0:15:27.11,Default,,0000,0000,0000,,What I thought is one thing you need to do is to
Dialogue: 0,0:15:27.60,0:15:34.34,Default,,0000,0000,0000,,prohibit these wagers on the evolution of price.
Dialogue: 0,0:15:34.34,0:15:36.11,Default,,0000,0000,0000,,It is one part of finance,
Dialogue: 0,0:15:36.11,0:15:39.84,Default,,0000,0000,0000,,it is a very essential part of finance nowadays.
Dialogue: 0,0:15:39.84,0:15:53.02,Default,,0000,0000,0000,,In 2007, 47% of the GDP in the US was constituted of financial operations.
Dialogue: 0,0:15:53.02,0:15:59.56,Default,,0000,0000,0000,,Out of these financial operations, on the commodities markets, the proportion varies:
Dialogue: 0,0:15:59.56,0:16:05.09,Default,,0000,0000,0000,,it varies between 80% and 90% of the activity on these commodities markets
Dialogue: 0,0:16:05.09,0:16:11.49,Default,,0000,0000,0000,,currently being done in the perspective of these wagers about fluctuations of prices,
Dialogue: 0,0:16:11.49,0:16:15.49,Default,,0000,0000,0000,,which is one aspect of what we call speculation.
Dialogue: 0,0:16:15.49,0:16:20.96,Default,,0000,0000,0000,,So what I was thinking is the part to carve out from finance
Dialogue: 0,0:16:20.96,0:16:24.59,Default,,0000,0000,0000,,to go back to a financial market which serves the economy,
Dialogue: 0,0:16:24.59,0:16:29.28,Default,,0000,0000,0000,,The part to carve is that part which is useless, dangerous,
Dialogue: 0,0:16:29.28,0:16:32.55,Default,,0000,0000,0000,,which takes a lot of money out of the economy.
Dialogue: 0,0:16:32.55,0:16:33.93,Default,,0000,0000,0000,,Just one remark:
Dialogue: 0,0:16:33.93,0:16:37.24,Default,,0000,0000,0000,,some people criticize this idea I've been expressing,
Dialogue: 0,0:16:37.24,0:16:39.58,Default,,0000,0000,0000,,saying "If you do what you say,
Dialogue: 0,0:16:39.58,0:16:44.25,Default,,0000,0000,0000,,too much money will go back into the economy, maybe leading to inflation."
Dialogue: 0,0:16:44.25,0:16:47.58,Default,,0000,0000,0000,,I think that it's a risk we can take.
Dialogue: 0,0:16:47.58,0:16:50.20,Default,,0000,0000,0000,,The objection to what I propose as that
Dialogue: 0,0:16:50.20,0:16:54.99,Default,,0000,0000,0000,,prohibition of bets, wagers on the evolution of prices,
Dialogue: 0,0:16:54.99,0:16:58.69,Default,,0000,0000,0000,,the main objection is saying "it's impossible to implement,
Dialogue: 0,0:16:58.69,0:17:02.90,Default,,0000,0000,0000,,it's too complicated, not everybody will agree to do it at the same time."
Dialogue: 0,0:17:02.90,0:17:07.34,Default,,0000,0000,0000,,The main response is the following:
Dialogue: 0,0:17:07.95,0:17:17.61,Default,,0000,0000,0000,,FASB 133 (Financial Accounting Standards Board of the United Nations, rule 133)
Dialogue: 0,0:17:17.61,0:17:22.73,Default,,0000,0000,0000,,is doing that curving out that I'm telling you about right now.
Dialogue: 0,0:17:22.73,0:17:25.08,Default,,0000,0000,0000,,It is there in that particular text.
Dialogue: 0,0:17:25.08,0:17:26.45,Default,,0000,0000,0000,,What's the purpose there?
Dialogue: 0,0:17:26.45,0:17:29.62,Default,,0000,0000,0000,,To make a difference between people that are useful to the economy
Dialogue: 0,0:17:29.62,0:17:31.39,Default,,0000,0000,0000,,and people that are detrimental.
Dialogue: 0,0:17:31.39,0:17:32.81,Default,,0000,0000,0000,,What is the purpose of the rule?
Dialogue: 0,0:17:32.81,0:17:34.93,Default,,0000,0000,0000,,To make a difference in taxation.
Dialogue: 0,0:17:34.93,0:17:37.90,Default,,0000,0000,0000,,People who are doing those parts
Dialogue: 0,0:17:37.90,0:17:40.04,Default,,0000,0000,0000,,(that I suggest to be removed all together)
Dialogue: 0,0:17:40.04,0:17:41.54,Default,,0000,0000,0000,,are taxed more.
Dialogue: 0,0:17:41.54,0:17:45.86,Default,,0000,0000,0000,,When I'm being told it's impossible just to define what needs to be done,
Dialogue: 0,0:17:45.86,0:17:49.52,Default,,0000,0000,0000,,it's already there, it's already in FASB133.
Dialogue: 0,0:17:49.52,0:17:52.56,Default,,0000,0000,0000,,And something more:
Dialogue: 0,0:17:52.56,0:17:56.13,Default,,0000,0000,0000,,A prohibition of wagers on the evolution of prices
Dialogue: 0,0:17:56.13,0:18:02.32,Default,,0000,0000,0000,,was part of the law of the majority of countries in the world in the 19th century.
Dialogue: 0,0:18:02.32,0:18:03.78,Default,,0000,0000,0000,,It was removed.
Dialogue: 0,0:18:03.78,0:18:08.14,Default,,0000,0000,0000,,The article in Penal Law in France is article 421.
Dialogue: 0,0:18:08.14,0:18:10.12,Default,,0000,0000,0000,,And it says exactly what I'm saying.
Dialogue: 0,0:18:10.12,0:18:15.65,Default,,0000,0000,0000,,It's forbidden to make wagers on the evolution of prices.
Dialogue: 0,0:18:15.65,0:18:18.38,Default,,0000,0000,0000,,It's been removed in 1885.
Dialogue: 0,0:18:18.38,0:18:23.01,Default,,0000,0000,0000,,I've been going into the History of this evolution.
Dialogue: 0,0:18:23.01,0:18:24.86,Default,,0000,0000,0000,,It's always the same explanation.
Dialogue: 0,0:18:24.86,0:18:29.82,Default,,0000,0000,0000,,Under the pressure of the business community, these rules were removed.
Dialogue: 0,0:18:29.82,0:18:33.84,Default,,0000,0000,0000,,And at some point when some countries started removing it,
Dialogue: 0,0:18:33.84,0:18:37.74,Default,,0000,0000,0000,,business communities in the other countries said:
Dialogue: 0,0:18:37.74,0:18:41.36,Default,,0000,0000,0000,,"we have a disadvantage now, we can't do this anymore."
Dialogue: 0,0:18:42.39,0:18:43.78,Default,,0000,0000,0000,,I'll close on that.
Dialogue: 0,0:18:43.78,0:18:46.72,Default,,0000,0000,0000,,I think it's not only possible,
Dialogue: 0,0:18:46.72,0:18:48.66,Default,,0000,0000,0000,,it's already in the text in some way.
Dialogue: 0,0:18:48.66,0:18:50.23,Default,,0000,0000,0000,,Some articles in the Law were there,
Dialogue: 0,0:18:50.23,0:18:53.34,Default,,0000,0000,0000,,they have been removed, they can be reinstituted.
Dialogue: 0,0:18:53.34,0:18:55.04,Default,,0000,0000,0000,,What I'm suggesting, what we need to do,
Dialogue: 0,0:18:55.04,0:18:57.68,Default,,0000,0000,0000,,and that doesn't mean that we shouldn't reform individuals.
Dialogue: 0,0:18:57.68,0:19:00.20,Default,,0000,0000,0000,,It needs to go together.
Dialogue: 0,0:19:00.20,0:19:02.63,Default,,0000,0000,0000,,What I'm suggesting is only possible
Dialogue: 0,0:19:02.63,0:19:05.80,Default,,0000,0000,0000,,if a large number of individuals reform themselves enough
Dialogue: 0,0:19:05.80,0:19:09.85,Default,,0000,0000,0000,,in order to say we need to take a measure like that.
Dialogue: 0,0:19:09.85,0:19:11.48,Default,,0000,0000,0000,,What I'm suggesting is:
Dialogue: 0,0:19:11.48,0:19:16.43,Default,,0000,0000,0000,,"Thou shalt not wager on the evolution of prices."
Dialogue: 0,0:19:16.43,99:59:59.00,Default,,0000,0000,0000,,Thank you.