Lessons Learnt From The 2008 Global Financial Crisis

At a time of global pandemic like today, the markets tend to be extremely volatile. Shirley Yu and Martina Fuchs of Hey China speak to Menachem Brenner, Business Professor at NYU Stern and father of Wall Street's ‘fear gauge’: the VIX, about how deep the current recession will be and the lessons learnt from the 2008 global financial crisis.

Brenner, who along with Dan Galai co-invented the volatility index  in 1986, expects the wild market swings and high volatility to continue throughout the year owing to the COVID-19 pandemic.

The VIX, based on the prices of traded index options, is now known as the Chicago Board Options Exchange's (CBOE) Volatility Index, or simply the VIX. Brenner is now developing a new tool to measure uncertainty: ambiguity. 

Here are the key remarks made by him in the interview:

"Guys, get ready for a long-haul year"

"We should look at both measures: the VIX and ambiguity"

"The Fed buying junk bonds crossed a red line"

"We don’t learn enough from history... What causes crashes is leverage" 

"I have a problem with behavioral economics, because it talks about the behavior of an individual and not the collectivity"

"If we privatize China’s banking system, then China can move ahead much faster"

"China should not kill the messenger"

Watch Full Hey China Video