I was reading an article today about how men are more tolerant of same-sex individuals than women because they have larger social groups and are essentially less picky about who they consider friends. In its final discussion, the authors wrote that “At the most primitive level, females may have lower thresholds than males for sensing negative visual, auditory, or olfactory information in unrelated same-sex individuals. Alternatively, there may be sex differences in thresholds for recognition of negative social signals, which would be consistent with females’ generally greater wariness toward conflict.” I thought this was odd because it seems just as likely that women are better able to sense negative social signals, and that this was why they formed more exclusive groups. But perhaps this is just the cynic in me…
The analysis of the 2008 financial crisis and economic recession produced by this seminar is available at http://2008financialcrisis.umwblogs.org .
Please email me the revised version of your book review, incorporating the comments you received on the wiki, by Sunday night. Thanks!
For each group presentation other than the one you gave please write a one page assessment to answer the following questions:
1. What was the crisis? How did it start?
2. What were the short term impacts (economic, political, social) of the crisis (i.e. while it was going on) in the countries where it originated?
3. What were the short term impacts in the rest of the world?
4. How did the crisis end?
5. What were the long term impacts in the countries of origin and in the rest of the world?
Your Book Review is due next Friday!
The Review should provide a written summary and analysis of the book, including the following parts:
- Who is the author? What is their expertise? Why are they credible on this topic?
- What is the author’s argument?
- Do you find it convincing? Why or why not?
- What does the author say about the global implications of the financial crisis, or what can we infer about the global implications from the author?
The Reviews will be published on the course website for everyone to see.
I didn’t like my previous post that occupied this place, so I’m rewriting it. The only part that I still like is this:
Also over the weekend, I decided that Rush Limbaugh and Karl Marx were, ironically, similar in their choice of audience and rhetorical techniques. They speak to a mass of people, and turn them against a priveleged elite. The only difference is that they are polar opposites on the political spectrum, and one understood things in general.
For the past decade or so, Americans have been living well beyond their means. While this created a problematic lending system domestically, as I previously ranted about, which is unsustainable, we also have been importing increasingly more than we have been exporting. Just in 2007, it appears that we have been running a trade deficit of greater than 100 trillion dollars. Logically, it makes sense that as aggregate income decreases, U.S. spending on both domestic and imported goods will decrease. This is one way of looking at it, at least. In that case, the countries from which we import our goods will lose money, causing their companies to record losses of revenue and adjust their allocation of funds. This will cause a decrease in incomes, and will ultimately lead to worldwide underemployment and recession.
What if we don’t decrease our spending on imports? The theory of demand accounts for changes in quantity of goods demanded given income, but also includes the availability of substitutes. What if these individuals who have been living outside of their means consider (more expensive) domestic goods as superior substitutes for (relatively inexpensive) imported substitutes? There are some items people can do without – people in troubled times won’t be buying the fancy new Guitar Hero guitar, or the illegal LED lights for the bottom of their cars; frivolous (luxury) spending will decrease. But for the items they can’t do without – toothpaste, food, etc. – they will substitute inferior substitutes. Instead of getting the unnecessarily exciting invigorating toothpaste in the shiny package, they will get the dubious, imported Wal-mart brand toothpaste for half the price (or less? Walmart is satan – I haven’t been in a while).
The general consumer is unconcerned about the ethics of shopping at Walmart – that is, the fact that their money is being transported to swindling sweatshop owners in the third world, allowing them to purchase their products at extra-strength low prices. Nor do they think about the fact that, by favoring Walmart to more expensive alternatives, they are taking their money away from U.S. production facilities and sending it abroad. If consumers are largely this complacent or desperate, more money will flow out of the U.S., causing increases in revenue for overseas firms. In the case of Walmart-style production, that money will just go to the factory owners, causing greater income inequality. Not all factories are like that, however, and in some cases I’m sure it will increase income levels at all levels of production. Either way, foreign economies that have become more competitive in international markets will increase their incomes, and therefore their demand and consumption.
Another alternative depends on government policy. The government could decide to defend domestic industry by implementing protectionist measures to artificially increase the world price of less expensive, foreign substitutes. I’m not entirely sure how this would impact the world market. I believe that it would cause consumer spending to decrease more evenly between domestic and imported goods, causing a situation more like the first scenario I described. What would that do to domestic economic conditions, however? Prices would be raised overall, and they would have to eliminate more items from their budget, I suppose. I’m not sure… inflation? deflation? you tell me! I think it’s a price effect, though, and that prices will fall as aggregate purchasing power decreases.
I think I’m also assuming throughout this entire thing that most U.S. consumers are irresponsible, and have been spending beyond their means to the extent that they have to be overly cautious. I’m also focusing on trade, not financial markets. There are altogether too many facets to rant about in one go. How would an individual representative of aggregate economic consumption decisions be characterized, I wonder? I think the savings rate has recently dropped to below 1%, so I find it hard to imagine him being that responsible… but maybe I’m mistaken.
I do believe that this is more what was expected initially. Hopefully I did not disappoint.
http://www.bea.gov/scb/pdf/2008/07%20July/0708_international.pdf
I remember back in the days when Dow hit 14000s in late summer of 2007 when I traded stocks as an individual trader. I thought that times were good. Whenever I watched CNBC and read Wall Street Journal, I never realized that US stock market faced any threat. However, things got ugly as subprime mortgage crisis unraveled. Since then I would never realize that I will ever experience what happened to be a largest US financial crisis since the Great Depression. Now that the Dow is hovering around 8000, 60% down from the all time high in the 2007 late summer, I would like to know how bursting of housing bubble could have such an immense affect on the US stock market and the economy. I cannot grasp and pinpoint the exact cause of the start of the US financial crisis but it seems to be the combination of all the misguided policies and greed. We cannot know or predict when this crisis will turn around. Krugman offers the dire prediction that US economy will resemble what Japan had experienced in the 1990s, a decade long of growth recession. According to Krugman the two major causes of US financial crisis resemble what other past financial crisis had been, which are asset bubble and housing bubble crash. It started to make sense and provided me with a big picture that the US economy was long-ago already on an inevitable path to the current crisis. The US economy, as the book states, a victim of a ponzi scheme. Americans were disillusioned by Greenspan and the government. We borrowed so much money from other countries to buy their products and kept inflating housing prices and we believed everything was okay. Why a collapse of housing market in the US can create a global recession? Despite BRICs and other emerging markets especially ones that experienced the financial crisis before, hoarded enough US and Euro currencies to prevent another financial crisis, these nations are still vulnerable to the US economic slowdown because much of their products and goods are exported to the US. When times are good, we tend to ignore the pundits who warned and predicted the burst of US economy bubble and the inherent problems but keep enlarging the problem until the problem actually get us. Maybe this financial crisis is another transition period for the US economy to advance into new financial era like back in the Great Depression. Still, the US economy is in flunk as of now and it seems it is getting worse, not better. We have to explore not only the past events that led to current crisis but also study the current development to understand the nature of the financial crisis.
Some of the things we need to figure out/some questions we need to explore before we answer this broad question are:
- What happened?-what lead to this financial crisis?, what is the history and background to this problem?, how long have the wheels been set in motion towards this crisis?
- Who are the major players in this crisis? – domestic, international
- What are the similarities between this financial crisis and past financial crises? How were these crises solved/fixed?
- What role does the United States play in international markets?
I am interested in learning and understanding how the United States got into this problem and what lead to it. By the end of this class, I want to be able to explain to others the current problem and what impact this crisis will have on the current and future Unites States and Global economy. I also want to learn more about international markets and what role the Unites States plays in them–How do other countries depend on the financial success of the United States and how does the United States depend on other countries?
I think one of the important distinctions we need to make in this assignment is the difference between correlation and causation. In order to understand the implications of the current financial crisis, we need to understand which symptoms would have occurred regardless of the US crisis and which are dependent upon it. We need to know about what had been going on before our financial problems and what has been going on since then. In other words, we not only need to have a firm grasp of the causes and consequences of our own recession, but also an equal comprehension of the state of the global economy as a whole and the individual economies of other countries. Also, we should look at the implications on countries that may not have much interaction with the US but may with strong trade partners of the US; a kind of second degree implication. Obviously, we need to also think about what will happen. But I think understanding what has happened so far will be our main source for these predictions.
One thing I am personally interested in is how long will the effects of this crisis last? Is this something that will eventually settle out and go back to the way things were or has this permanently changed our economic system? If so, will it affect purely capitalistic countries in a different way than countries that also practice some socialist policies?
Also, would it be helpful to compare our current economic state to the 1980’s and the 1930’s? And perhaps even comparing our crisis to past crises in other countries? How are we doing in relation to past problems?
I’ve heard it said that this large recession has been caused by what is essentially a buildup of pressure from the lack of large recessions since the 80’s. I’m not sure I agree, but it’s something to look into.
Was this caused by the increase in globalization? Will this help or hurt globalization?
Alright, I’m done ranting.
