2008 financial and economic crisis - mar-narrated 2015

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Details of the decision, historical trends and reasons why the U.S. economy and financial system crashed in 2008

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Slide1:

Edward J. Dodson, M.L.A. March 2015 The 2008 Financial and Economic Crisis: What Brought Us to the Brink

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STRESS

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The Modern Era:

The Modern Era

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“What can be achieved by the consensus of the major interest groups in the United States is very substantial. The flood of legislation in 1965 verified the possibility of moderate improvement within the fiscal limits set by business predominance in the administration coalition. …”

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“In short, conservative expansionism is really capable of making American society tolerable for most Americans. Nevertheless, its limitations are such, its powerful tendencies to favor the prosperous are so dominant, and its suspicion of the public sector is still so strong that it will take a more vigorous path of government action, ...”

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“… the road to liberal intervention, to convert even an enlightened commercial community into a Great Society – to move from Keynesian fiscal policy to the Keynesian vision of a rational community.”

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“Since most government officials felt ignorant of finance, they sought advice from bankers whom they considered to be experts in the field. The history of the last century shows … that the advice given to governments by bankers … was consistently good for bankers, but was often disastrous for governments, businessmen, and the people generally.”

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“a promise to pay nothing in particular.”

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“....[I]n the autumn of 1925, ... the Florida boom was at its height. ...[M]en and women ... were exposed to the most delirious fever of real-estate speculation which had attacked the United States in ninety years. The Florida boom in fact, was only one -- and by all odds the most spectacular -- of a series of land and building booms during the Post-war Decade, each of which had its marked effect upon the national economy and the national life.”

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“The word ‘rent’ was originally used, and still is, to describe what someone received for the use of a piece of his land—it’s the return obtained by virtue of ownership, and not because of anything one actually does or produces. This stands in contrast to ‘wages’, for example, which connotes compensation for the labor that workers provide. …”

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“The acquisition of rights to mine or drill produces a form of rent. So does preferential tax treatment for special interests. In a broad sense, “rent seeking” defines many of the ways by which our current political process helps the rich at the expense of everyone else, including transfers and subsidies from the government, laws that make the marketplace less competitive, laws that allow C.E.O.’s to take a disproportionate share of corporate revenue, … and laws that permit corporations to make profits as they degrade the environment. . …”

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“The magnitude of “rent seeking” in our economy, while hard to quantify, is clearly enormous. Individuals and corporations that excel at rent seeking are handsomely rewarded. The financial industry, which now largely functions as a market in speculation rather than a tool for promoting true economic productivity, is the rent-seeking sector par excellence. Rent seeking goes beyond speculation. … ”

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“The financial sector also gets rents out of its domination of the means of payment—the exorbitant credit- and debit-card fees and also the less well-known fees charged to merchants and passed on, eventually, to consumers. The money it siphons from poor and middle-class Americans through predatory lending practices can be thought of as rents. ”

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“By the end of the 1970s, there was a general recognition that fiscal and monetary policy had failed. Instead of ‘fine-tuning’, we had ‘stagflation’. Keynesianism foundered as it steered between the shoals of inflation and the rocks of unemployment and ran onto both at once.”

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Arthur Laffer Jude Wanniski Jack Kemp

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OR CLEAN AND PAINT LEASE

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“I wish someone would give me one shred of neutral evidence that financial innovation has led to economic growth – one shred of evidence.”

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"The Federal Reserve, consistent with its responsibilities as the nation's central bank, affirmed today its readiness to serve as a source of liquidity to support the economic and financial system."

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‘The central bankers, whether they admitted it or not, were taking it on themselves to keep the markets afloat. That caused two things. Investors believed they would be rescued if things went bad, which boosted share prices. …”

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“And the stimuli had knock-on effects, so the stimulus provided in the late 1990s [during the Asian and LTCM crises] is viewed by many now as the reason the tech bubble bubbled up so much. Each time a stimulus is provided there is an ill effect that nobody is looking at elsewhere.”

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2000 - 2014

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$59,900 New Construction in 1978:

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$100,000

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Maximum Loan Amount for a One-Family Property: $93,750

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Maximum Loan Amount for a One-Family Property: $115,300

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Maximum Loan Amount for a One-Family Property: $252,700

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Maximum Loan Amount for a One-Family Property: $359,650

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"The failure to eliminate or control the business cycle, despite repeated attempts to do so, suggests that the received wisdoms do not lead governments to remedies that work. A second reason is that economics, as it is employed today, is seriously prejudiced by the dilution of some of its key concepts. …”

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"Economists routinely work with economic models that treat the world as if it were composed of two factors - labor and capital - instead of the three-factor model favoured by the classical economists. This disembodies the economy from its spatial context. ...For land is the key piece of the jigsaw that is the complex economy."

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H. William Batt (retired from the research staff of the New York State Senate) Kris Feder, Bard College Gary Flomenhoft, Gund Institute for Ecological Economics Fred Foldvary, San Jose State University Bryan Kavanagh, Land Values Research Group (Australia) Nicolaus Tideman, Virginia Polytechnic Institute

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Taxing Rent-Derived Income Yields Public Revenue Without Deadweight Losses Imposed On the Production of Wealth

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ROCK HARD PLACE

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