Didier Sornette: How we can predict the next financial crisis

The video discusses the concept of economic growth during the Great Moderation and the subsequent Great Recession. It introduces the Dragon-Kings theory, which identifies extreme events as predictable and controllable, unlike the Black Swan theory. The video explains super-exponential growth and its risks, and applies the Dragon-Kings theory to various fields, including finance and biology. It also covers the Financial Bubble Experiment, which aims to predict financial bubbles and crises, emphasizing the need for sustainable economic practices.

What was the Great Moderation characterized by?

• Frequent economic recessions

• Steady GDP growth and low financial volatility

• Uncontrolled financial markets

• High inflation and unemployment

How do dragon-kings differ from black swans?

• Dragon-kings are unpredictable, while black swans are predictable

• Both are predictable events

• Both are unpredictable events

• Dragon-kings are predictable, while black swans are considered unpredictable

What is a key early warning signal of a financial bubble according to the dragon-king theory?

• Sudden market crashes

• Linear growth

• Super-exponential growth

• Constant market stability

In which fields has the dragon-king theory been successfully applied?

• Only in medicine

• Only in biology

• Finance, biology, and medicine

• Only in finance

What does the illusion of a perpetual money machine refer to?

• The belief that money can be endlessly printed without consequences

• The idea that financial markets are always stable

• The concept that economic growth is always linear

• The notion that financial bubbles are rare

What was a major critique of quantitative easing and austerity measures?

• They fail to tackle the structural causes of financial instability

• They effectively address the core issues of financial crises

• They are universally accepted as the best solutions

• They are only applicable in developing countries

What is the purpose of the Financial Bubble Experiment?

• To predict financial crises in advance

• To stabilize global markets permanently

• To create new financial bubbles

• To eliminate all financial risks

How does the Financial Bubble Experiment ensure the authenticity of its predictions?

• By relying on government reports

• By making predictions publicly available immediately

• By using modern encrypting techniques and public keys

• By publishing predictions after the events occur

What is a potential global implication of the dragon-king theory?

• It suggests that all crises are unpredictable

• It offers hope for predicting and mitigating future crises

• It implies that financial markets are inherently stable

• It indicates that economic growth is always sustainable

What is the main challenge in developing a science of economics according to the transcript?

• The unpredictability of natural disasters

• The self-fulfilling nature of economic predictions

• The complexity of mathematical models

• The lack of historical data