Table of Contents

INTRODUCTION
--The Overall Idea
--Table of Contents
--Summary of Argument
--Updates and Acknowledgments

FINANCIAL STRESS
--Doom Is Busting Out All Over
--World Stock Market Capitalization Crumbles
--Twin Peaks
--Stock Market Volatility
--High Yield Bonds Over 20%
--High Yield Credit Spreads Top Levels of 2003
--AAA Corporate Bonds: Compared to What?
--LIBOR and Financial Stress
--Flame-Broiled Mortgage Spreads
--TED Spread from 1980s
--Commodities Tank
--Consumer Credit Crashing
--One Big Happy Human Family
--The Banking System: The Issue of Trust
--Carry Trades Unwinding
--Measuring Inflation
--Unemployment Mythologies and the "Misery Index"
--If You Want More,
--Minsky Moments

HOUSING BUBBLE
--California at Height of Bubble
--In the Long Run We're All Dead
--Financial Firm Profitability and Real Estate
--The Big House
--Regional Variation in Housing Declines
--US Homeowners with No or Negative Equity
--One in Six Homeowners Under Water
--Future Housing Prices
--Out of Whack: House Prices and Disposable Income
--Rent Ratios Mean Housing Will Fall Further
--A Cautionary Lesson from Japan

DEBT BINGE
--Total Credit Market Debt is Way High
--Debt to GDP from 1920s
--History is Not Bunk
--Profits of Financial Firms
--Debt Fueled the Equity Boom
--Margin Debt
--Consumer Debt Outstanding
--About That Loan
--National Debt as Percent of GDP (from 1950)
--The Two National Debts
--Understated Obligations
--Stairway to Heaven: Yet More Unfunded Obligations
--Total US Debt and US Debt/World Equity Ratio
--2009 Deficit to $2 Trillion, 12.5% of GDP
--Maxims on Debt and Credit

DERIVATIVES JUNGLE
--One More Bad Thing
--Credit Default Swamps
--Happiness Through Bilateral Netting
--The Mothership of the Derivatives Structure: JP Morgan Chase
--Leverage Ratios at European Banks
--Leverage Unbound at the Investment Banks
--Slicing and Dicing Those Damn Derivatives

SCALE OF LOSSES
--Estimates of Losses
--The Housing ATM and Losses on Real Estate
--Losses and Liquidity
--Preparing for a Rainy Day?
--House Debt as Percent of Compensation
--The Importance of Being Credit-Worthy
--A Comparison with Japan

RESCUES AND REMEDIES
--Deteriorating Balance Sheet at the Fed
--The Greatest Bailout of Them All
--Cash for Trash: The Fed's Balance Sheet
--Paulson Plan, circa October 14, 2008
--Zingales is a Hero; Paulson is a Lout
--The Major Scandal
--Last Resort
--Poor Goldman Sachs
--The Grand Alternative
--The US Hedge Fund and the Bond Conundrum
--Uncle Sam's Adjustable Rate Mortgage
--Twin Towers

GLOBAL IMBALANCES
--Crazy World Order
--Deficit on Current Account Contracting
--Our Best Friends: Foreign Central Banks
--Flight to Quality by Foreign Central Banks
--The End of Bretton Woods II
--The Linked Dangers Foretold (Sort Of)

LESSONS
--Six Lessons from the Financial Crisis
--Implications for "Defense"
--Joseph Stiglitz Excoriates Economists
--Paper Topics
--The Ten Commandments
--The Ten Steps
--Further Reading
--Man, Did I Screw Up
--We Value What We Save in a Crisis