At the origin of the 2007-2008 crisis

Almost 10 years after the crisis I think it is important to remember the causes of it in order not to repeat the same mistakes.

The globalisation of financial market began in the early 19th century and quickly some fundamental questions rose up such as the vulnerability of this globalisation to crises or the policies that must be took by governments. Because globalisation means that various financial actors are connected in different countries, this connection creates a sort of dependance.

As communication technologies became more and more sophisticated and powerful it increased this globalisation permiting financial flows to cross the entire world almost instentaneously. With these technologies banks and investors trade with the world beyond national borders exchanging large amount of secured data. This context saw a new type of financial product created : the derivate instruments, these products take into account the risk of a loan, so it allows banks, borrowers, investor, lenders, speculators, etc to play on the inequal repartition of informations. Idealy, in a totaly globalized markets the prices should be the same everywhere, it is not depending on the location, but financial markets aren’t truly global. If someone in China don’t know the risk of your product you can sell him a higher price than its real price for example. Consequently this system is based on trust.

We can say that the globalisation of financial markets is a new playground for financial actors seeking for profit, that is why it needs to be regulated.

After the Great Depression of the 1930’s the US government took mesures in order to prevent from another crisis, banks are prohibited from using the money of their customers to invest. Follows a 40 years period of gross without any crisis.




Gradually some bankers and economists having a position in the government will start to deregulate the financial market: the 1934 law prohibiting investments is repeal, attempts to regulate the new derivates product are blocked.

Using this favorable context and the globalized financial markets a Ponzi pyramide is set up with the securitization. The lender provide a loan to home buyer materialized by a financial security, the lender sells this security to investments bank which aggregate various securities to create a CDO, the bank sells this CDO at investors allover the world.


  • CDO is a way to hide dodgy securities
  • CDOs are rated based on their repayment capacity by notation agencies, this agencies are payed by the bank, the better the rate is the more they earn
  • Due to high rates subprimes (dodgy securities) are interesting for banks
  • All these things encourage the financial actors to take higher risks
  • Leverage: Banks borrow to buy CDOs


Another process to increase even more these profits is to take out insurance at the AIG, an institution which pay the investor at the amount of its losses if the CDO goes wrong. Investment banks such as Goldman Sachs, Lehman Brothers, etc used this to take out an insurance against there own CDOs, knowing that they were full of dodgy securities.

Even if the crisis started in the US the impact on the rest of the world was significant because of the globalisation, the american investments banks couldn’t have played alone, CDOs travelled abroad and european banks used the same mechanism to make profit. The non-regulation of the financial market was generalized and governments of different countries didn’t do anything. The IMF warned of the danger but due to the power of the lobbyists nobody listened.

The day Lehman Brothers was declared in bankruptcy banks around the world became suspicious about others and the financial markets seems to stop. One by one banks of different countries went bankrupt squeezed by the weight of their huge debts and possessing CDOs that is worth nothing. And then you know what happened …

– Théo Quint


– Inside Job, Charles Ferguson, 2010

– (2017). [online] Available at: [Accessed 17 Jul. 2017].

– (2017). Global Financial Crisis — Printer friendly version — Global Issues. [online] Available at: [Accessed 17 Jul. 2017].

– Bank, E. (2017). The globalisation of financial markets. [online] European Central Bank. Available at: [Accessed 17 Jul. 2017].


To deal with the crisis in a Icelandic way

We are 8 years after the fall of Lehman Brothers. The all West is in crisis … All? No! A small island of irreducible Icelanders still resists to the finance. And life is not easy for banks and other bankers.

I think that we all eared about Iceland letting its banks fail and putting bankers in prison. Every time you read an article about Iceland recovery after the 2007 crisis it is polarized. The reason is that Iceland dealt with this crisis in an unconventional way which, depending on the arguments you keep, is in favour or against the EU policies, that is to say austerity. Some people will tell you that Iceland is the paradise on Earth, the land of justice when other will explain that the success of the country is all about luck, austerity and help from other countries. As you can imagine the reality is just between these two points of view. That is why we will divide what permitted Iceland to become one of the countries recovering the fastest and the better after the crisis in two parts: the external factors and the internal factors. And this in order to determine what is due to the action of the government and what is not.




The crisis was a wave coming from the United-States but the sensibility of each country to this wave was linked to its own financial system. In Iceland the financial sector was deregulated in the 90’s with low-tax policy, the goal was to attract foreign investments and companies. The banks of the country – especially the tree biggest Landsbanki, Glitnir, and Kaupthing – began raising their interest rates on the loans encouraging people to borrow and making the island an international financial centre. Traders and individuals from all over the world borrowed in foreign currencies to the banks, especially in the United-Kingdom and Netherlands. In 2007 banks’ debts were worth 900% of Iceland GDP. “Iceland, in the decade and a half leading up to the crisis, was an example of collective madness”, said Willem Buiter, chief economist at Citigroup. When the crisis hit the island the consequences were disastrous. “Over 80 percent of the financial system buckled and almost all businesses on the island were bankrupted. The stock market fell by around 95 percent and interest payments on loans soared to over 300 percent. Over 60 percent of bank assets were written off within a few months after the banks collapsed and interest rates were hiked up to 18 percent in order to curb inflation rates”, according to World Finance. But Iceland managed to recover from the crisis.

Firstly the two external factors we will speak about are linked to the geographical position of the island. The Eyjafjöll volcano that paralyzed the air traffic in 2010 contributed to attract tourism by leading people to know about this particular country located on an oceanic breach. In 2010 the country welcomed 486,000 tourists for only 320,000 inhabitants. Tourism represents now almost one third of the exportations. Another external factor is an increase of mackerel in the Icelandic seas. This is linked to global warming, the Atlantic Ocean is becoming hotter and the mackerel migrated to the North. “Fishing is more important for Iceland than the car industry for Germany or the oil industry for Norway,” according to Sigurgeir Thorgeirsson, Iceland’s chief fisheries negotiator. It represents 23% of the exportations.

The other external factors are the drop of the krona and the loans from the IMF and the neighbouring countries. The IMF accorded a $2.1bn loan to Iceland in November 2008 – which is 50 times less than the one to Greece in 2010 – and the neighbouring countries $2.5. These loans helped the country to protect domestic deposits and reduce the devaluation of the krona in value. But at the same time this devaluation was helpful for the country because it regained competitiveness. Inside the country there was no difference for the people, they kept the same purchasing power but at an international level their work and production was worth less.




Now that we have seen the external factors on which Iceland did not have the control we will focus on the internal factors, e.g. the decision making of the government. One of the first and most original action was to decide not to save the banks. Because the banks were “to big to save” Iceland decided to let the banks fail. In fact the banks were not “to big to save” in a sense that you can save the banks even if they were worth 10 times your GDP, but then you have a gigantic debt, like Ireland. The Icelandic government just chose not to impose this burden to future generations. And it is understandable. Why does a State would have to pay for the bad behaviour of private banks? So Iceland let its banks fail but at the same time guaranteed the deposits of its citizens, the ones that lost money were the foreign creditors (in majority in the United-Kingdom and the Netherland). These two countries in response asked Iceland to give back the money, the IMF and the European Commission sided with them. In the end the European Free-Trade Association decided that Iceland did not have to pay for the actions of its banks. “The ruling made it clear that the country where a banking company has its headquarters is not responsible for guaranteeing that company’s foreign liabilities” says Eva Joly, who advised Iceland Special Prosecutor in the criminal investigation after the crisis.

Then the bank CEOs, finance managers, banks’ lawyers, major shareholders and high-ranking civil servants responsible were condemned or at least put under investigation. The central bank of Iceland took the control of the banks to reform the financial sector. “After the crash, the government cleaned house in all the three banks, establishing new boards and management. Banks in Iceland are well capitalised with high equity levels and financial supervision has been strengthened immensely”, said Gudrun Johnsen, Assistant Professor of Finance at the University of Iceland, told World Finance.

However Iceland also applied austerity and budget cutting, and it is a key of its recovery. But austerity alone increases inequalities, the reason why Iceland was able to show good economical and social results at the same time is because it kept a strong welfare state. The role of these spending in social protection is to be an automatic stabiliser, as Joseph Stiglitz calls it, which permitted to sustain household demand. Benefits were redirected to lower income groups, according to Stefán Ólafsson from the University of Iceland.

As you can see on the following charts created from Eurostat’s database Iceland is performing very well. The country has the lowest unemployment and inequality rate compared to Germany, Greece, France, Italy, Sweden and the United-Kingdom.






The question raised is: do another country applying the same methods than Iceland would have been able to reach the same results? And the answer is obviously: no. For several reasons the case of Iceland is unique: it is a country with a small population living for the most part in a city, tourism due to the volcano and the rise of fishing is specific to the island and the country is not in the European Union. However the political courage of refusing to bail out the banks, searching for the culprits, judging them and regulating the banks must be an example for other countries.

– Théo Quint



– (2016). Icelantis By Tjeerd Royaards | Politics Cartoon | TOONPOOL. [online] Available at: [Accessed 3 Dec. 2016].

–        Philippe Deschamps. (2016). Des Pirates à l’assaut de l’Islande. [online] Le Monde Diplomatique. Available at: [Accessed 3 Dec. 2016].

–        Philippe Deschamps. (2016). Le tourisme en Islande, une nouvelle bulle ?. [online] Le Monde diplomatique. Available at: [Accessed 3 Dec. 2016].

–        McDonald-Gibson, C. (2013). EU tackles Iceland over ‘mackerel wars’. [online] The Independent. Available at: [Accessed 4 Dec. 2016].

–         O’Brien, M. (2016). The miraculous story of Iceland. [online] Washington Post. Available at: [Accessed 26 Nov. 2016].

–        Lawless | AP, J. (2016). In volcanic Iceland, eruptions bring risk, and tourism boom. [online] Washington Post. Available at: [Accessed 26 Nov. 2016].

–        Paul Krugman Blog. (1333). Screw Your Analysis to the Sticky Point. [online] Available at: [Accessed 26 Nov. 2016].

– (2016). Failing banks, winning economy: the truth about Iceland’s recovery. [online] Available at: [Accessed 26 Nov. 2016].

–        Joseph Stiglitz (2009). The Global Crisis, Social Protection And Jobs. International Labour Review, Vol. 148, No. 1–2

– (2016). Database – Eurostat. [online] Available at: [Accessed 26 Nov. 2016].

– (2011). IMF Survey: Iceland’s Unorthodox Policies Suggest Alternative Way Out of Crisis. [online] Available at: [Accessed 26 Nov. 2016].

– (2016). CADTM – Iceland refuses its accused bankers ‘Out of Court’ settlements. [online] Available at: [Accessed 26 Nov. 2016].

– (2016). EUR-Lex – l24012b – EN – EUR-Lex. [online] Available at: [Accessed 26 Nov. 2016].

– (2010). IMF Survey: Europe and IMF Agree €110 Billion Financing Plan With Greece. [online] Available at: [Accessed 8 Dec. 2016].


How fair is fair trade?

Fair trade goal is to work with small farmers all around the world and provide them better purchase prices in order for them to live decently. As stated in the Fair Trade Principles, faire trade is “trading partnership, based on dialogue, transparency and respect that seeks greater equity in international trade”. The main organisation is Fairtrade Foundation; almost every fair trade good you will buy is controlled by it. The market of fair trade is important: “sales of Fairtrade products have grown to €7.3 billion (£6.3 billion) working with 1,230 producer organisations consisting of 1.6m farmers. “ says Bob Doherty in The Conversation based on the annual report of the Fairtrade Foundation.

The guarantee of a minimum price for the farmers regardless of the variation of the market allows them to have a long-term vision and access to credit services. There is also what is called a “social premium”. It is an addition given to the community of worker in order to be used for infrastructure projects such as schools for example.


We can think that fair trade is a little bit a marketing argument to capture the demand of the new world-conscious consumers in rich countries. However a study by the Center for Evaluation at Saarland University in Germany has show that it has a real impact on socio-economical development. For example the producers of cocoa in Ghana have seen their incomes increase in 5 years:

incomes farmer fairtrade

But incomes are not the more important thing. Some people are starving to death even if they are farmers. With Fairtrade farmers are able to improve the food security of their family throughout the year. Julio Mercado Cantillo, a banana farmer in Colombia, explains: “When we began growing bananas, it was tough. There were some days when we only had one meal. Since we joined Fairtrade, everything has changed. We now have all of our daily meals and we have also managed from the extra income from Fairtrade to buy farm animals which provides an extra source of food, and the opportunity to bring in more income by selling the animals.”

Ok so Fairtrade is much better than “normal” trade. Nevertheless we can go beyond that because the Foundation helps the farmers but the final goal must be to set these farmers on an equal footing with other producers. The vision of Fairtrade is still little bit paternalist.

Alan Schaller, journalist for The Independent, went to Ethiopia to study the Union Hand Roasted Coffee, a UK based coffee importer. The Union is not only paying the farmers a descent price it is working with them on the spot to improve biodiversity conservation and the quality of the product. In this manner the producers can sell their products at a higher price and compete with the high quality brands. “Relying on consumers to return to a coffee out of a belief in a certification stamp on a packet is not as effective as promoting a product that is highly competitive among the finest coffees being produced anywhere.” says Alan Schaller. The community of farmers advised by experts can later real world connections. The drawbacks are that this process takes years and needs a constant control by the Union. But this is what we should strive for.

– Théo Quint



–       The Conversation. (2017). Food security: how Fairtrade helps level the playing field for small producers. [online] Available at: [Accessed 16 Jul. 2017].

– (2017). [online] Available at: [Accessed 17 Jul. 2017].

–       Schaller, A. (2017). The evolution Of Fairtrade: Why we need to go a step further. [online] The Independent. Available at: [Accessed 16 Jul. 2017].







Is China really on the path to become the world leader of renewable energies?

At the G20 Summit in Hamburg 19 of the 20 members, excluding the United States, agreed that the Paris climate accord was irreversible and reaffirmed their commitment. With Donald Trump withdrawing from the Paris Agreement it seems that China wants to be the new leader on renewable energies and environment protection. This new role can be difficult to believe when we know the high level of air pollution in Beijing and the pollution of water in Hong Kong. Moreover China and the use are responsible for 40% of the world’s CO2 emission. In fact there are two different things to consider: the investment in renewable energies and the consciousness of environmental protection. And we will see that both are present in China nowadays.


The first thing to do is to stop viewing China as a retarded country about ecology because ours are not good examples either. Like conservation Dr Jane Goodall says “Is China still causing environmental destruction in Africa and Latin America? Yes. Did not European colonialism do exactly the same and aren’t many big corporations today doing exactly the same?“. And with the climatoscepticism of Donald Trump it is even worse.

China plans to invest $360 billion by 2020

Xi Jinping wants his country to invest in renewable energies because he understood that it is a new expanding market in which China can draw benefits. The time when China was the world’s factory is ending. The purchasing power of the population is rising and the coal is becoming more and more uneconomical. “Market forces favoring solar and wind power threaten to leave the United States behind, with the continued decline of coal, whereas China wants to benefit from new energy markets and plans to invest $360 billion by 2020. This would take the proportion of renewables in domestic energy to 50 percent by then.” According to Mark Robinson from

But the government is not only thinking about the benefits of renewable sources of energy other measures are being implemented. For example Zheijang province they are restricting the number of cars in order to reduce air pollution and reduce massive queues. Protection of animal species is also taken into account like recovering the giant panda species to the point it’s no longer considered endangered and President Xi Jinping has declared its ivory trade will be shut down by the end of 2017.

Each year between 1 and 1.6 million Chinese people die early as a result of air pollution

Like I said before all these measures are going into the right direction but we must not forget that problems of air, soil and water pollution combined with excessive use of pesticides and are causing serious health issues in China. “Each year between 1 and 1.6 million Chinese people die early as a result of air pollution which is caused primarily by industrial and car emissions.” according to the University of Oslo. The study says that 40% of air pollution may be caused by household when people are cooking or heating. “In the villages we study people have been protesting against air pollution from factories in their vicinity, but they have little knowledge about the air pollution that is caused by their cooking.” says Mette Halskov Hansen. But the consciousness about environmental problems might change.



During winter 2013 the smog in Beijing was particularly thick which led to attract the attention of the public on the issue of air pollution. You can now even find apps allowing people to check air quality in real time.

People are more and more well informed about pollution. Thanks to the action of public protest, negative media coverage and the U.S. Embassy in Beijing the government now permits the public release of data about air, water and soil pollution. “Since the introduction of the new Environmental Protection Law in 2015, China’s courts have accepted 189 public interest environmental cases, mostly brought by environmental non-governmental organizations. The Ministry of Environmental Protection, which is responsible for implementation of the new law, has intensified local inspections of heavily-polluting industries and is now actively collecting public complaints on environmental issues.” for Mark Robinson.


Another unexpected source of environmental consciousness is religion. Because the Democratic Republic Of China was build on communism religions were banned. But recently president Xi Jinping encouraged the study of Chinese traditions, including religion. The goal is to compete against the influence of Western culture. The government thus tolerates the rise of religious environmentalism. In an article for The New-York Times Javier C. Hernàndez states that “Hundreds of millions of people in China have in recent years turned to religions like Taoism, Buddhism, Christianity and Islam, seeking a sense of purpose and an escape from China’s consumerist culture.” He interviewed an abbot from Mao Mountain, Mr. Yang, who is using Taoism to speak about ecology. Nothing new under the sun, Taoism and Buddhism are known to take into account the relationship between humans and nature. As one Taoist teaching says : “Humans follow the earth, the earth follows heaven, heaven follows Taoism, Taoism follows nature.” This type of thinking is different from the Western notion of saving the Earth. Religion is deeper than that, the goal is to live in harmony with nature and all living things.


– Théo Quint



– (2017). Is there a green awakening in China?. [online] Available at: [Accessed 16 Jul. 2017].

–       Newshub. (2017). China now world leader in environmental protection – Jane Goodall. [online] Available at: [Accessed 16 Jul. 2017].

–       Hernández, J. (2017). China’s Religious Revival Fuels Environmental Activism. [online] Available at: [Accessed 16 Jul. 2017].

–       Eco-Business. (2017). Will China and India lead on global climate action and environmental protection?. [online] Available at: [Accessed 16 Jul. 2017].