In Greek mythology, Cassandra was
the daughter of the king of Troy.
She saw the future, but the gods had
decreed that no one would believe her.
Ten years ago we were surprised when
investment bank Lehman Brothers collapsed.
Backlight reported for a decade
on the crisis that came in its wake.
They simply create money,
and then actually buy things with it.
Sometimes it's looking back
that allows you to see...
...where you may be headed.
If we look carefully,
will we see the next crisis coming?
This is Backlight.
Because past performance
never guarantees future results.
The 2008 financial crisis seemed
predicted by three Cassandras.
We visit them again after ten years.
What did they see
that most others did not?
Take Izabella Kaminska,
at the time a journalist with CNBC...
...today with the influential newspaper
Financial Times.
And we had a cup of tea
with economist Ann Pettifor.
Long before investment bank
Lehman Brothers fell, she knew...
...that many countries were in such
debt as to make a crisis inevitable.
Our last Cassandra is former banker
Nomi Prins.
We find her giving a lecture
at the London School of Economics:
The Valhalla for economists.
Prins used to work for the investment bank
Goldman Sachs.
Today she warns us again
for a new crisis.
Understanding why we are
on the brink of a crisis...
...involves knowing
how everything is tied in together.
A month after Lehman Brothers
collapsed...
...three banks were rescued
in the Netherlands alone:
ABN Amro, ING, and SNS Reaal.
The bill came to 30 billion euros,
coughed up by the Dutch taxpayers.
Banks were saved all over the world.
We spent ten years travelling the globe
to find out the consequences.
We spoke to begging firefighters.
We consulted the 1%.
In Greece we were moved by workers
posting at their own factory...
...to protect it from looters.
When the business folded
I was out of a job. I can't find another.
People are hungry
and the shops are shut.
We spoke to traders with no regrets.
We tried to discover the formula
behind the toxic mortgage products.
And on Santa Barbara beach
we met unexpected homeless people.
But can we really learn from the past?
People say we haven't learned
anything, but we really have.
Insiders now know that outsiders
will believe anything.
The Dutch fight
over their national anthem.
But spending billions on saving a bank
is too boring to worry about.
It wasn't boring to us. In Chicago we
hoped to find out the precise reason...
...why all those banks
wanted to be saved.
Each red dot in this neighbourhood
is a foreclosure.
These bundled mortgage products
are the well-known CDOs:
Financial products that did
a lot of damage all over the world.
Not just for home owners
with ill-considered mortgages.
Also for those who bought the
derivatives: investors, pension funds...
...and European banks.
What genius had come up
with these toxic mortgage products?
In upstate New York
we found an oysterer.
20 years ago he wrote the software
that ended up doing so much damage.
Why did a problem on the US housing
market have such a global impact?
European banks eagerly bought
the inventive financial products.
Innovative financial products turned out
to make quite unexpected victims.
Like the mayor of an Italian village.
A community like ours,
population about 300...
We were able to sell off our debts.
I'm putting it a bit black-and-white
to make it clear.
If we sold our debts,
we'd get an up front right away.
Meaning an amount of money
in the bank.
If I put money into a savings account,
I get barely 1% interest.
We got 2% if we sold our debts.
Where would that money come from?
That freaked me out a bit.
But in the end
we came to an agreement...
...and we fell into the same trap
as 80 or 90% of the country.
The truth about this amazing
financial construction...
...is that only the man who devised it
understood what he meant by it.
It wasn't only picturesque Italian
villages that were in deep trouble.
An economically vital city like Milan
was also buried in derivatives.
One alert councilman who had worked
in finance himself raised the alarm.
In the summer of 2007 I was in London.
I had worked in finance for years.
I met someone who was in banking.
He said Milan was very active
in the derivatives market.
I was on the council,
but I knew nothing about that.
It seemed strange to me
that the city had so many derivatives.
1.7 billion euros, the man said.
That's huge for a municipality.
Back in Milan I ask for all the info
on the derivatives.
It was a lot. I studied all of it.
It was the biggest derivatives
transaction in Europe.
Those banks had a 30-year guarantee
that if Italy were to go bankrupt...
...the city of Milan would pay up.
That is in no way
part of a city's responsibilities.
No municipality
can insure the national debt.
Those derivatives were set up
for 30 years, in such a way...
...that the profit or loss for the city
worked in reverse for the bank.
If we lost 20 million,
the bank would gain 20 million.
Are banks allowed to advise a client
against that client's interest?
The city of Milan tried to get justice
and sued the banks...
...that sold the derivatives.
The banks, with their 21 lawyers,
lost the case at first.
But on appeal they were acquitted.
Villages and towns are still negotiating
their way out of the derivatives today.
Some are liable to keep up
the payments through to 2032.
The situation in Greece
grows more painful by the day.
The banks had helped not only towns
to brush up their budgets.
Goldman Sachs helped Greece,
with specially designed derivatives...
...to clear the country's accounts
of its debts altogether.
In 2010 Greece was defaulting
on its debts.
But Portugal, Ireland, Italy, and Spain
were also facing technical bankruptcy.
no to taxes
resistance, solidarity
Thieves, thieves.
Brussels had to step in.
They presented Greece with a series
of impossible demands...
...to help them pay their debts.
It's all over for Greece.
We'll never recover from this.
We're all going down,
and the big shots won't feel a thing.
We're footing the bill here.
Brussels forced Greece
to sell everything the country had.
The Port of Piraeus was sold to China.
The gold was sold to Canada.
But when the waterworks were
about to be sold off to France...
...the Greeks rebelled.
Go up one at a time.
Business interest must never outweigh
the life and health of the people.
The UN says every person has the
right to clean water, and that's final.
Suppose you ran the country.
Would the people be alright then?
That's a fine democracy.
Ask the people in a referendum
if they want to sell the water.
You mention our democracy,
so why are you here?
Sorry, but I've had it now.
The newly chosen progressive
Greek government delegation...
...tried to turn the tide in Brussels.
But they had to battle
the current political powers.
The Greek finance minister Varoufakis...
...pinpointed this as the structural
cause of the problem:
The response to the growing mistrust
of the banking world...
...was a cryptocurrency called bitcoin.
Its inventor, the still elusive
Satoshi Nakamoto...
...registered the domain bitcoin.org one
month before Lehman Brothers crashed.
As if he knew what was coming.
Three years ago we spoke
to Izabella Kaminska at the FT.
She already predicted back then what
the fast rise of bitcoin would mean.
Curious about the new 1%, we met
bitcoin millionaire Roger Ver in Japan.
He's known as Bitcoin Jesus.
Ver fled the US after ten months
in prison for selling illegal fireworks.
He's convinced that he was punished
on ideological grounds.
But it was precisely bitcoin's ability to
operate outside government structures...
...that was the strength of the new
currency for its inventor and investors.
The value of Roger Ver's bitcoins,
which he bought in 2011 for $25,000...
...fluctuated between 200
and 700 million dollars last year.
Today, ten years on, governments
seem to have the system under control.
Nomi Prins warns us about
the danger of 'quantitative easing'.
Central bankers all over the world
create money out of thin air...
...through buy-up programmes.
This strategy began in the US
to pump money into the system...
...in hopes of keeping it going.
How does that work:
creating money out of nothing?
We discover it's been daily practice in
our own Dutch Central Bank since 2015.
I'll show you a transaction.
I'm selecting an obligation.
Immediately we see some parties
making an offer.
It's an acceptable price
for this transaction, so we'll pay...
...22.9 million euros to them.
So now you have an extra
22.9 million euros.
Yes, we have created 22.9 million
electronic euros.
In creating electronic money,
the traders at the DNB...
...buy state obligations as well as
shares in businesses.
Other central banks in Europe do this
too, commissioned by the ECB.
We wondered who exactly benefits
from this money-creating business.
A central bank purchasing so much,
that's very special.
They simply create money
and then buy things with it.
They make something out of nothing
and buy bank notes with it.
A big buyer drives up the price
of the obligations.
And then they make
a stock market profit.
We asset managers love that.
Because Mario is always
on the other side of the trade.
Yes. You see?
Mario is Mario Draghi, the president
of the European Central Bank.
The man who has pumped 2500 billion
euros into the economy...
...since the start of the asset purchase programme.
If they had asked me ten years ago:
What happens to a Central Bank
president with this policy?
I would have said:
A guy who does that will lose his job...
...and be put in prison or in the
closed ward of a mental institution.
I never thought we'd see
what we've seen in the past decade.
How does the created money move
around the shadow banking world?
And who decides where it goes?
The economy is getting back on its feet.
Draghi expects to close the asset purchase
programme before 2019.
