professor of economics thomas r. brown professor in economics education
TRANSCRIPT
Professor of EconomicsThomas R. Brown
Professor in Economics Education
THE “GREAT RECESSION” HAS BEEN OFFICIALLY OVER FOR ALMOST THREE YEARS!
OFFICIALLY STARTEDDECEMBER 2007
OFFICIALLY ENDEDJUNE 2009
THE GREAT RECESSION WAS THE LONGEST RECESSION SINCE THE GREAT DEPRESSION
THE RECOVERY FROM THE RECESSION HAS BEEN THE WEAKEST IN THE POST WWII PERIOD
GOVERNMENT POLICY
COMMODITY INFLATION
MORAL HAZARD
CHANGE IN HOW WE CALCULATE INFLATION
EVERYONE SHOULD OWN A HOME CHANGE IN TAX LAWS REPEAL GLASS/STEAGALL ACT MORTGAGE FINANCE GIANTS
FANNIE MAEFREDIE MAC
2003-2004 FED FUNDS RATES LOWER THAN ANY TIME SINCE THE SERIESBEGAN IN 1955
RECORD U.S. TRADE DEFICITS
GLUT OF WORLD SAVINGS
LOW WORLD INTEREST RATES
MORTGAGED BACKED SECURITIES
WORLD MARKET FOR THE SECURITIES
UNDERESTIMATION OF RISK
A MORAL HAZARD IS A SITUATION WHERE THERE IS A TENDENCY TO TAKE UNDUE RISK BECAUSE THE COSTS ARE NOT BORNE BY THE PARTY TAKING THE RISK.
BANKS
MORTGAGE BROKERS
REAL ESTATE APRAISERS
SECURITY BROKERS
RATING AGENCIES
HOME BUYERS
HOUSING BUBBLE STARTED TO BURST IN 2006
AMERICAN’S DREAM STARTS TO BECOMEAMERICA’S NIGHTMARE
COMMODITY PRICES HIT RECORD HIGHS IN THE SUMMER OF 2008
RECORDSOIL PICES $147/BARRELGASOLINE PRICES $4.00/GALCORN PRICES $5.75/BU
INELASTIC DEMAND FOR THESE COMMODITIES
SEPTEMBER 2008
WORLD CREDIT MARKETS FREEZE
REAL RISK OF WORLD DEPRESSION