Francesco Papadia and Tuomas Vӓlimӓki
- Published in print:
- 2018
- Published Online:
- April 2018
- ISBN:
- 9780198806196
- eISBN:
- 9780191844058
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780198806196.003.0003
- Subject:
- Economics and Finance, Macro- and Monetary Economics
Monetary policy before the Great Recession rested on three unacknowledged assumptions: first, the central bank could effectively control a short-term rate; second, this short-term rate had a stable ...
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Monetary policy before the Great Recession rested on three unacknowledged assumptions: first, the central bank could effectively control a short-term rate; second, this short-term rate had a stable relationship with longer/riskier rates; third, the central bank could move the short-term rate up or down as needed. In one or the other phase of the Great Recession one or more of these assumptions no longer held. The Fed and the ECB reacted to these difficulties, adding balance sheet management to their weaponry. After the failure of Lehman Brothers, measures of financial stress exploded and the banking sector was affected by an acute lack of liquidity, large losses, a disproportion between diminished capital and a riskier balance sheet, low profitability, enhanced competition of shadow banks, deleveraging, and difficulties in raising new capital. The Fed and the ECB could address some, but not all, of these problems.Less
Monetary policy before the Great Recession rested on three unacknowledged assumptions: first, the central bank could effectively control a short-term rate; second, this short-term rate had a stable relationship with longer/riskier rates; third, the central bank could move the short-term rate up or down as needed. In one or the other phase of the Great Recession one or more of these assumptions no longer held. The Fed and the ECB reacted to these difficulties, adding balance sheet management to their weaponry. After the failure of Lehman Brothers, measures of financial stress exploded and the banking sector was affected by an acute lack of liquidity, large losses, a disproportion between diminished capital and a riskier balance sheet, low profitability, enhanced competition of shadow banks, deleveraging, and difficulties in raising new capital. The Fed and the ECB could address some, but not all, of these problems.
Ruth Milkman
- Published in print:
- 2016
- Published Online:
- April 2017
- ISBN:
- 9780252040320
- eISBN:
- 9780252098581
- Item type:
- chapter
- Publisher:
- University of Illinois Press
- DOI:
- 10.5406/illinois/9780252040320.003.0011
- Subject:
- Society and Culture, Gender Studies
This chapter compares the gender dynamics of the Great Depression of the 1930s with those of the Great Recession associated with the 2008 financial crisis. It begins with a discussion of the ...
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This chapter compares the gender dynamics of the Great Depression of the 1930s with those of the Great Recession associated with the 2008 financial crisis. It begins with a discussion of the relationship between gender and unemployment, and between gender and family dynamics during the economic crises. It then examines the family wage and married women's employment in the 1930s as well as inequality among women during the Great Recession. Despite the many changes in gender relations that unfolded in the intervening decades, the chapter shows that the structural effects of the two economic downturns were similar. In both cases, female unemployment increased less, and later, than male unemployment, and birth, marriage, and divorce rates declined as well. The Great Depression spurred a political transformation that led to a sharp reduction in economic inequality, accompanied by a dramatic upsurge in union organizing. Neither of these developments took place after the 2008 crisis. Instead, inequalities between the haves and have-nots have continued to widen, and especially class inequality among women.Less
This chapter compares the gender dynamics of the Great Depression of the 1930s with those of the Great Recession associated with the 2008 financial crisis. It begins with a discussion of the relationship between gender and unemployment, and between gender and family dynamics during the economic crises. It then examines the family wage and married women's employment in the 1930s as well as inequality among women during the Great Recession. Despite the many changes in gender relations that unfolded in the intervening decades, the chapter shows that the structural effects of the two economic downturns were similar. In both cases, female unemployment increased less, and later, than male unemployment, and birth, marriage, and divorce rates declined as well. The Great Depression spurred a political transformation that led to a sharp reduction in economic inequality, accompanied by a dramatic upsurge in union organizing. Neither of these developments took place after the 2008 crisis. Instead, inequalities between the haves and have-nots have continued to widen, and especially class inequality among women.
Josh Bivens
- Published in print:
- 2011
- Published Online:
- August 2016
- ISBN:
- 9780801450150
- eISBN:
- 9780801460654
- Item type:
- book
- Publisher:
- Cornell University Press
- DOI:
- 10.7591/cornell/9780801450150.001.0001
- Subject:
- Economics and Finance, Public and Welfare
This book relays a compelling narrative of the U.S. economy's struggle to emerge from the Great Recession of 2008. It explains the causes and impact on working Americans of the most catastrophic ...
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This book relays a compelling narrative of the U.S. economy's struggle to emerge from the Great Recession of 2008. It explains the causes and impact on working Americans of the most catastrophic economic policy failure since the 1920s. Economic growth since the late 1970s has been slow and inequitably distributed, largely as a result of poor policy choices. These choices only got worse in the 2000s, leading to an anemic economic expansion. What growth we did see in the economy was fueled by staggering increases in private-sector debt and a housing bubble that artificially inflated wealth by trillions of dollars. As had been predicted, the bursting of the housing bubble had disastrous consequences for the broader economy, spurring a financial crisis and a rise in joblessness that dwarfed those resulting from any recession since the Great Depression. The fallout from the Great Recession makes it near certain that there will be yet another lost decade of income growth for typical families, whose incomes had not been boosted by the previous decade's sluggish and localized economic expansion. In its broad narrative of how the economy has failed to deliver for most Americans over much of the past three decades, the book also offers compelling graphic evidence on jobs, incomes, wages, and other measures of economic well-being most relevant to low-and middle-income workers. It tracks these trends carefully, giving a lesson in economic history that is readable yet rigorous in its analysis.Less
This book relays a compelling narrative of the U.S. economy's struggle to emerge from the Great Recession of 2008. It explains the causes and impact on working Americans of the most catastrophic economic policy failure since the 1920s. Economic growth since the late 1970s has been slow and inequitably distributed, largely as a result of poor policy choices. These choices only got worse in the 2000s, leading to an anemic economic expansion. What growth we did see in the economy was fueled by staggering increases in private-sector debt and a housing bubble that artificially inflated wealth by trillions of dollars. As had been predicted, the bursting of the housing bubble had disastrous consequences for the broader economy, spurring a financial crisis and a rise in joblessness that dwarfed those resulting from any recession since the Great Depression. The fallout from the Great Recession makes it near certain that there will be yet another lost decade of income growth for typical families, whose incomes had not been boosted by the previous decade's sluggish and localized economic expansion. In its broad narrative of how the economy has failed to deliver for most Americans over much of the past three decades, the book also offers compelling graphic evidence on jobs, incomes, wages, and other measures of economic well-being most relevant to low-and middle-income workers. It tracks these trends carefully, giving a lesson in economic history that is readable yet rigorous in its analysis.
Josh Bivens and Lawrence Mishel
- Published in print:
- 2011
- Published Online:
- August 2016
- ISBN:
- 9780801450150
- eISBN:
- 9780801460654
- Item type:
- chapter
- Publisher:
- Cornell University Press
- DOI:
- 10.7591/cornell/9780801450150.003.0001
- Subject:
- Economics and Finance, Public and Welfare
This introductory chapter argues that the consequences of the Great Recession are driven by social and political choices about how the economy is managed. It was not inevitable that the significant ...
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This introductory chapter argues that the consequences of the Great Recession are driven by social and political choices about how the economy is managed. It was not inevitable that the significant run-up in home prices that began in the late 1990s would end with more than eight million Americans losing their jobs and unemployment hitting a twenty-five-year peak. The chapter argues against ascribing the impact of the Great Recession to mere fate, instead it draws comparisons between the shockwaves generated by the economic recession and that of another recent catastrophe—Hurricane Katrina—thus highlighting crucial choices made during and after the aforementioned disasters struck.Less
This introductory chapter argues that the consequences of the Great Recession are driven by social and political choices about how the economy is managed. It was not inevitable that the significant run-up in home prices that began in the late 1990s would end with more than eight million Americans losing their jobs and unemployment hitting a twenty-five-year peak. The chapter argues against ascribing the impact of the Great Recession to mere fate, instead it draws comparisons between the shockwaves generated by the economic recession and that of another recent catastrophe—Hurricane Katrina—thus highlighting crucial choices made during and after the aforementioned disasters struck.
Marc Mulholland
- Published in print:
- 2012
- Published Online:
- January 2013
- ISBN:
- 9780199653577
- eISBN:
- 9780191744594
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199653577.003.0016
- Subject:
- History, World Modern History, History of Ideas
The collapse of Communism and the weakening of Social Democracy in the face of post-industrial capitalism seemed to nullify all systemic challenges to liberal capitalism. The Neo-conservatives ...
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The collapse of Communism and the weakening of Social Democracy in the face of post-industrial capitalism seemed to nullify all systemic challenges to liberal capitalism. The Neo-conservatives celebrated the triumph of free-market democracy, but worried that bourgeois civil society lacked the moral sinews to see off interstitial challenges from political Islam. The 9.11 atrocity and the subsequent War on Terror allowed for a ‘forward strategy’ in the Middle east, and Iraq was the set-piece for an export of bourgeois revolution on the points of bayonets. The liberation of Iraq was a bloody mess, however, and from the 2008 Great Recession deep-rooted economic problems in the model of financialized capitalism became evident. Nonetheless, bourgeois liberalism was not exhausted: rather, the markets demanded and the politicians agreed that marketization of social life was the appropriate response to multiple social and economic dysfunctions.Less
The collapse of Communism and the weakening of Social Democracy in the face of post-industrial capitalism seemed to nullify all systemic challenges to liberal capitalism. The Neo-conservatives celebrated the triumph of free-market democracy, but worried that bourgeois civil society lacked the moral sinews to see off interstitial challenges from political Islam. The 9.11 atrocity and the subsequent War on Terror allowed for a ‘forward strategy’ in the Middle east, and Iraq was the set-piece for an export of bourgeois revolution on the points of bayonets. The liberation of Iraq was a bloody mess, however, and from the 2008 Great Recession deep-rooted economic problems in the model of financialized capitalism became evident. Nonetheless, bourgeois liberalism was not exhausted: rather, the markets demanded and the politicians agreed that marketization of social life was the appropriate response to multiple social and economic dysfunctions.
Matthew P Drennan
- Published in print:
- 2015
- Published Online:
- May 2016
- ISBN:
- 9780300209587
- eISBN:
- 9780300216349
- Item type:
- book
- Publisher:
- Yale University Press
- DOI:
- 10.12987/yale/9780300209587.001.0001
- Subject:
- Political Science, Public Policy
This book tells two stories. First, it shows that rising income inequality played a major role in causing the financial crisis and Great Recession of 2008-2009. While others have argued that rising, ...
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This book tells two stories. First, it shows that rising income inequality played a major role in causing the financial crisis and Great Recession of 2008-2009. While others have argued that rising, indeed surging, household debt in the 1990s and 2000s contributed to the financial collapse, none have related rising household debt to the dramatic rise in income inequality. The rise in household debt was not the result of a rash of luxury, but instead was the effort to maintain consumption despite stagnant incomes. Part of that effort is reflected in the unprecedented drop in the rate of saving from around 10 percent to near zero. It is also reflected in the sharp rise of relative spending on three necessities of a middle class lifestyle -- housing, education, and health. Some of that jump in relative spending was brought about by steep price increases. Their prices were bid up by those whose incomes had skyrocketed. Thus to the usual suspects causing the recession–unsustainable residential mortgage debt, low interest rates, predatory lending and the housing price bubble–income inequality must be included. The second story is that mainstream economists have misunderstood the causes of the recession because they have adhered to a macroeconomic theory that ignores the role of income distribution. Mainstream economic theory maintains that inequality has no impact on macroeconomic outcomes. That view is incorrect and led most economists to ignore the serious consequences of rising inequality, despite the striking parallel with the Great Depression.Less
This book tells two stories. First, it shows that rising income inequality played a major role in causing the financial crisis and Great Recession of 2008-2009. While others have argued that rising, indeed surging, household debt in the 1990s and 2000s contributed to the financial collapse, none have related rising household debt to the dramatic rise in income inequality. The rise in household debt was not the result of a rash of luxury, but instead was the effort to maintain consumption despite stagnant incomes. Part of that effort is reflected in the unprecedented drop in the rate of saving from around 10 percent to near zero. It is also reflected in the sharp rise of relative spending on three necessities of a middle class lifestyle -- housing, education, and health. Some of that jump in relative spending was brought about by steep price increases. Their prices were bid up by those whose incomes had skyrocketed. Thus to the usual suspects causing the recession–unsustainable residential mortgage debt, low interest rates, predatory lending and the housing price bubble–income inequality must be included. The second story is that mainstream economists have misunderstood the causes of the recession because they have adhered to a macroeconomic theory that ignores the role of income distribution. Mainstream economic theory maintains that inequality has no impact on macroeconomic outcomes. That view is incorrect and led most economists to ignore the serious consequences of rising inequality, despite the striking parallel with the Great Depression.
Johannes Lindvall
- Published in print:
- 2010
- Published Online:
- January 2011
- ISBN:
- 9780199590643
- eISBN:
- 9780191723407
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199590643.003.0005
- Subject:
- Political Science, Comparative Politics, Political Economy
The concluding chapter summarizes the main results, discusses the implications of these results for the literature on comparative political economy, and shows how governments in Austria, Denmark, the ...
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The concluding chapter summarizes the main results, discusses the implications of these results for the literature on comparative political economy, and shows how governments in Austria, Denmark, the Netherlands, and Sweden responded to the deep economic crisis in 2008–2009.Less
The concluding chapter summarizes the main results, discusses the implications of these results for the literature on comparative political economy, and shows how governments in Austria, Denmark, the Netherlands, and Sweden responded to the deep economic crisis in 2008–2009.
Edward Montgomery
- Published in print:
- 2014
- Published Online:
- April 2017
- ISBN:
- 9780252038174
- eISBN:
- 9780252095979
- Item type:
- chapter
- Publisher:
- University of Illinois Press
- DOI:
- 10.5406/illinois/9780252038174.003.0013
- Subject:
- Sociology, Social Stratification, Inequality, and Mobility
This chapter begins with a brief review of the evidence on the causes of the Great Depression and its impact on workers and their families. It examines some of the similarities and differences in the ...
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This chapter begins with a brief review of the evidence on the causes of the Great Depression and its impact on workers and their families. It examines some of the similarities and differences in the causes of the Great Recession and its impact on workers. It briefly summarizes some of the different policies that presidents Roosevelt and Obama enacted to shorten the crisis and ease the burden on workers. It argues that while presidents Roosevelt and Obama were both called “socialist” by critics, their similarities are limited, and both the short- and long-term impacts of the policies they enacted during these crises are quite different for workers. While the near-term impact of the Great Recession was dwarfed by the Great Depression, the Great Recession exacerbated long-term structural trends that may well leave workers facing far more uncertain futures. Workers' own relative passivity in the face of these dynamics contrasts sharply with their grandparents' generation during the Great Depression. Absent a revival of their activism, we may well see the continued erosion, or even the end, of the New Deal social contract.Less
This chapter begins with a brief review of the evidence on the causes of the Great Depression and its impact on workers and their families. It examines some of the similarities and differences in the causes of the Great Recession and its impact on workers. It briefly summarizes some of the different policies that presidents Roosevelt and Obama enacted to shorten the crisis and ease the burden on workers. It argues that while presidents Roosevelt and Obama were both called “socialist” by critics, their similarities are limited, and both the short- and long-term impacts of the policies they enacted during these crises are quite different for workers. While the near-term impact of the Great Recession was dwarfed by the Great Depression, the Great Recession exacerbated long-term structural trends that may well leave workers facing far more uncertain futures. Workers' own relative passivity in the face of these dynamics contrasts sharply with their grandparents' generation during the Great Depression. Absent a revival of their activism, we may well see the continued erosion, or even the end, of the New Deal social contract.
Rebecca Zarutskie and Tiantian Yang
- Published in print:
- 2017
- Published Online:
- May 2018
- ISBN:
- 9780226454078
- eISBN:
- 9780226454108
- Item type:
- chapter
- Publisher:
- University of Chicago Press
- DOI:
- 10.7208/chicago/9780226454108.003.0007
- Subject:
- Economics and Finance, Econometrics
We examine the evolution of several key firm-level economic and financial variables in the years surrounding and during the Great Recession using the Kauffman Firm Survey, a large panel of young ...
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We examine the evolution of several key firm-level economic and financial variables in the years surrounding and during the Great Recession using the Kauffman Firm Survey, a large panel of young firms founded in 2004 and surveyed for eight consecutive years. We find that these young firms experienced slower growth in revenues, employment, and assets and faced tighter financing conditions during the recessionary years. While we find some evidence that firm growth picked up following the recession, it is not clear that it returned to the levels it would have been absent the recessionary shock. We find little evidence that financing conditions for young firms loosened following the recession and show that financing constraints, in addition to diminished demand, may have contributed to these firms’ slower growth. We discuss the strengths and the limitations of the Kauffman Firm Survey in measuring the impact of the Great Recession on young firms and consider features of future data collection and measurement efforts that would be useful in studying entrepreneurial activity over the business cycle.Less
We examine the evolution of several key firm-level economic and financial variables in the years surrounding and during the Great Recession using the Kauffman Firm Survey, a large panel of young firms founded in 2004 and surveyed for eight consecutive years. We find that these young firms experienced slower growth in revenues, employment, and assets and faced tighter financing conditions during the recessionary years. While we find some evidence that firm growth picked up following the recession, it is not clear that it returned to the levels it would have been absent the recessionary shock. We find little evidence that financing conditions for young firms loosened following the recession and show that financing constraints, in addition to diminished demand, may have contributed to these firms’ slower growth. We discuss the strengths and the limitations of the Kauffman Firm Survey in measuring the impact of the Great Recession on young firms and consider features of future data collection and measurement efforts that would be useful in studying entrepreneurial activity over the business cycle.
Jaison R. Abel and Richard Deitz
- Published in print:
- 2018
- Published Online:
- September 2019
- ISBN:
- 9780226567808
- eISBN:
- 9780226567945
- Item type:
- chapter
- Publisher:
- University of Chicago Press
- DOI:
- 10.7208/chicago/9780226567945.003.0006
- Subject:
- Economics and Finance, Development, Growth, and Environmental
Though labor market conditions steadily improved following the Great Recession, underemployment among recent college graduates continued to climb, reaching highs not seen since the early 1990s. In ...
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Though labor market conditions steadily improved following the Great Recession, underemployment among recent college graduates continued to climb, reaching highs not seen since the early 1990s. In this paper, we take a closer look at the jobs held by underemployed college graduates in the early stages of their careers during the first few years after the Great Recession. Contrary to popular perception, we show that relatively few recent graduates were working in low-skilled service jobs, and that many of the underemployed worked in fairly well paid non-college jobs requiring some degree of knowledge and skill. We also find that the likelihood of being underemployed was lower for those with more quantitatively oriented and occupation-specific majors than it was for those with degrees in general fields. Moreover, our analysis suggests that underemployment is a temporary phase for many recent college graduates as they transition to better jobs after spending some time in the labor market, particularly those who start their careers in low-skilled service jobs.Less
Though labor market conditions steadily improved following the Great Recession, underemployment among recent college graduates continued to climb, reaching highs not seen since the early 1990s. In this paper, we take a closer look at the jobs held by underemployed college graduates in the early stages of their careers during the first few years after the Great Recession. Contrary to popular perception, we show that relatively few recent graduates were working in low-skilled service jobs, and that many of the underemployed worked in fairly well paid non-college jobs requiring some degree of knowledge and skill. We also find that the likelihood of being underemployed was lower for those with more quantitatively oriented and occupation-specific majors than it was for those with degrees in general fields. Moreover, our analysis suggests that underemployment is a temporary phase for many recent college graduates as they transition to better jobs after spending some time in the labor market, particularly those who start their careers in low-skilled service jobs.
Matthew P. Drennan
- Published in print:
- 2015
- Published Online:
- May 2016
- ISBN:
- 9780300209587
- eISBN:
- 9780300216349
- Item type:
- chapter
- Publisher:
- Yale University Press
- DOI:
- 10.12987/yale/9780300209587.003.0001
- Subject:
- Political Science, Public Policy
Synopsis of book. U.S. trends in income distribution. Causes of rising income inequality. Consumers shift to massive debt. Why most economists overlooked importance of income inequality. Strong ...
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Synopsis of book. U.S. trends in income distribution. Causes of rising income inequality. Consumers shift to massive debt. Why most economists overlooked importance of income inequality. Strong parallel of run-up to Great Recession with run-up to Great Depression.Less
Synopsis of book. U.S. trends in income distribution. Causes of rising income inequality. Consumers shift to massive debt. Why most economists overlooked importance of income inequality. Strong parallel of run-up to Great Recession with run-up to Great Depression.
Michael D. Hurd
- Published in print:
- 2013
- Published Online:
- January 2014
- ISBN:
- 9780804785853
- eISBN:
- 9780804786430
- Item type:
- chapter
- Publisher:
- Stanford University Press
- DOI:
- 10.11126/stanford/9780804785853.003.0006
- Subject:
- Economics and Finance, Microeconomics
This chapter provides an overview of the section of the text that examines job loss. The main theme of the chapter is that since the Great Recession is more severe than the periods covered by some of ...
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This chapter provides an overview of the section of the text that examines job loss. The main theme of the chapter is that since the Great Recession is more severe than the periods covered by some of the data used in the individual analyses, they may understate the likely impacts of recent job losses. One particular area the discussion points towards as being different in the Great Recession is the depressed housing market. While prior recessions have resulted in both job loss and temporary declines in the equity markets, the extent of the negative impact of the Great Recession on housing equity is unusual. Housing is a major component of wealth for many families so a sharp decline implies fewer resources to react and adapt to job loss. Also, job loss itself often precedes home foreclosure.Less
This chapter provides an overview of the section of the text that examines job loss. The main theme of the chapter is that since the Great Recession is more severe than the periods covered by some of the data used in the individual analyses, they may understate the likely impacts of recent job losses. One particular area the discussion points towards as being different in the Great Recession is the depressed housing market. While prior recessions have resulted in both job loss and temporary declines in the equity markets, the extent of the negative impact of the Great Recession on housing equity is unusual. Housing is a major component of wealth for many families so a sharp decline implies fewer resources to react and adapt to job loss. Also, job loss itself often precedes home foreclosure.
Arthur E. Wilmarth Jr. Jr.
- Published in print:
- 2020
- Published Online:
- September 2020
- ISBN:
- 9780190260705
- eISBN:
- 9780190260736
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780190260705.003.0001
- Subject:
- Economics and Finance, Financial Economics
Universal banks arose in the U.S. during two periods in the past century—the 1920s and the late 1990s. On both occasions, universal banks in the U.S. and Europe promoted intense boom-and-bust cycles ...
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Universal banks arose in the U.S. during two periods in the past century—the 1920s and the late 1990s. On both occasions, universal banks in the U.S. and Europe promoted intense boom-and-bust cycles that led to global calamities—the Great Depression of the early 1930s and the Great Recession of 2007–09. Universal banks received extensive bailouts on both sides of the Atlantic during both crises. Three core features of universal banks cause them to generate destructive boom-and-bust cycles. First, pervasive conflicts of interest prevent them from acting as objective lenders or as impartial investment advisers. Second, bonus-driven cultures encourage their insiders to take speculative risks to produce short-term profits. Third, their ability to convert loans into asset-backed securities allows them to package risky loans into securities sold as purportedly “safe” investments to poorly informed investors. The Glass-Steagall Act of 1933 broke up universal banks and established structural buffers that prevented spillovers of risk between the banking system and other financial sectors. The U.S. avoided systemic financial crises after World War II until Glass-Steagall was undermined by regulators and ultimately repealed by Congress. Congress failed to adopt similar structural reforms after the Great Recession. As a result, universal banks continue to dominate our financial markets and pose unacceptable systemic dangers. We urgently need a new Glass-Steagall Act to break up universal banks again and restore a more stable and resilient financial system.Less
Universal banks arose in the U.S. during two periods in the past century—the 1920s and the late 1990s. On both occasions, universal banks in the U.S. and Europe promoted intense boom-and-bust cycles that led to global calamities—the Great Depression of the early 1930s and the Great Recession of 2007–09. Universal banks received extensive bailouts on both sides of the Atlantic during both crises. Three core features of universal banks cause them to generate destructive boom-and-bust cycles. First, pervasive conflicts of interest prevent them from acting as objective lenders or as impartial investment advisers. Second, bonus-driven cultures encourage their insiders to take speculative risks to produce short-term profits. Third, their ability to convert loans into asset-backed securities allows them to package risky loans into securities sold as purportedly “safe” investments to poorly informed investors. The Glass-Steagall Act of 1933 broke up universal banks and established structural buffers that prevented spillovers of risk between the banking system and other financial sectors. The U.S. avoided systemic financial crises after World War II until Glass-Steagall was undermined by regulators and ultimately repealed by Congress. Congress failed to adopt similar structural reforms after the Great Recession. As a result, universal banks continue to dominate our financial markets and pose unacceptable systemic dangers. We urgently need a new Glass-Steagall Act to break up universal banks again and restore a more stable and resilient financial system.
Bridget Terry Long
- Published in print:
- 2015
- Published Online:
- September 2015
- ISBN:
- 9780226201832
- eISBN:
- 9780226201979
- Item type:
- chapter
- Publisher:
- University of Chicago Press
- DOI:
- 10.7208/chicago/9780226201979.003.0007
- Subject:
- Economics and Finance, Microeconomics
This paper explores how the Great Recession affected college enrollment and costs to families. As with past recessions, reductions in income and increases in tuition prices could have had negative ...
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This paper explores how the Great Recession affected college enrollment and costs to families. As with past recessions, reductions in income and increases in tuition prices could have had negative effects on enrollment, while growing unemployment could have had the opposite effect by reducing the foregone costs of attending school. However, the Great Recession occurred within a much more complex postsecondary context than ever before, with the prominence of student loans but the changing availability of debt, a major increase in the number of college-age students, and substantial policy changes in federal financial aid. The net effect of these positive and negative pressures is unclear. Using data from the Integrated Postsecondary Education Data System (IPEDS), an annual survey of colleges and universities, I investigate how the Great Recession affected college enrollment levels, attendance intensity, tuition costs, and financial aid. The analysis suggests college attendance levels increased during the recession, especially in the states most affected in terms of rising unemployment and declining home values, but it was part-time enrollment that grew while full-time enrollment declined. The tuition revenue collected per student also grew, while grants did not offset the increase in cost, and student loan amounts also increased.Less
This paper explores how the Great Recession affected college enrollment and costs to families. As with past recessions, reductions in income and increases in tuition prices could have had negative effects on enrollment, while growing unemployment could have had the opposite effect by reducing the foregone costs of attending school. However, the Great Recession occurred within a much more complex postsecondary context than ever before, with the prominence of student loans but the changing availability of debt, a major increase in the number of college-age students, and substantial policy changes in federal financial aid. The net effect of these positive and negative pressures is unclear. Using data from the Integrated Postsecondary Education Data System (IPEDS), an annual survey of colleges and universities, I investigate how the Great Recession affected college enrollment levels, attendance intensity, tuition costs, and financial aid. The analysis suggests college attendance levels increased during the recession, especially in the states most affected in terms of rising unemployment and declining home values, but it was part-time enrollment that grew while full-time enrollment declined. The tuition revenue collected per student also grew, while grants did not offset the increase in cost, and student loan amounts also increased.
Harold Wolman, Howard Wial, Travis St. Clair, and Edward Hill
- Published in print:
- 2017
- Published Online:
- September 2018
- ISBN:
- 9780801451690
- eISBN:
- 9781501709494
- Item type:
- chapter
- Publisher:
- Cornell University Press
- DOI:
- 10.7591/cornell/9780801451690.003.0002
- Subject:
- Sociology, Urban and Rural Studies
The chapter examines shocks to regional economies, the extent to which regions are resistant to these shocks, whether regions that are adversely affected by these shocks are resilient in the face of ...
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The chapter examines shocks to regional economies, the extent to which regions are resistant to these shocks, whether regions that are adversely affected by these shocks are resilient in the face of them and why. We begin by defining and operationalizing economic shocks and the various ways in which they might affect regional economies. The analytic part of the chapter is devoted to quantitative descriptions and analyses of regional economic shocks and their determinants, causes, and consequences during the period 1978 to 2007 and then, separately, in a period coinciding with the Great Recession and its recovery, from 2007 to 2014.Less
The chapter examines shocks to regional economies, the extent to which regions are resistant to these shocks, whether regions that are adversely affected by these shocks are resilient in the face of them and why. We begin by defining and operationalizing economic shocks and the various ways in which they might affect regional economies. The analytic part of the chapter is devoted to quantitative descriptions and analyses of regional economic shocks and their determinants, causes, and consequences during the period 1978 to 2007 and then, separately, in a period coinciding with the Great Recession and its recovery, from 2007 to 2014.
Jeremy L. Wallace
- Published in print:
- 2014
- Published Online:
- August 2014
- ISBN:
- 9780199378982
- eISBN:
- 9780199379019
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199378982.003.0006
- Subject:
- Political Science, Comparative Politics
The sixth chapter examines China’s sailing through the Great Recession of the late 2000s with little apparent damage. China weathered the storm due to its long-term strategy of managed urbanization ...
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The sixth chapter examines China’s sailing through the Great Recession of the late 2000s with little apparent damage. China weathered the storm due to its long-term strategy of managed urbanization and migration along with an economic stimulus. These factors structured, dispersed, and reduced discontent generated by the Great Recession. Whereas one might expect the government to have directed all funds to coastal provinces that bore the brunt of the economic downturn, the government instead sent much of its fiscal stimulus investment to interior provinces. The regime, fearing instability and unrest among newly unemployed migrant workers along the coast, sought to encourage employment in the interior. Along with continued collective ownership of land in the countryside and the hukou system, the fiscal stimulus facilitated stability by providing channels for those negatively affected by the crisis to return to the countryside and smaller cities in the interior, dispersing discontent.Less
The sixth chapter examines China’s sailing through the Great Recession of the late 2000s with little apparent damage. China weathered the storm due to its long-term strategy of managed urbanization and migration along with an economic stimulus. These factors structured, dispersed, and reduced discontent generated by the Great Recession. Whereas one might expect the government to have directed all funds to coastal provinces that bore the brunt of the economic downturn, the government instead sent much of its fiscal stimulus investment to interior provinces. The regime, fearing instability and unrest among newly unemployed migrant workers along the coast, sought to encourage employment in the interior. Along with continued collective ownership of land in the countryside and the hukou system, the fiscal stimulus facilitated stability by providing channels for those negatively affected by the crisis to return to the countryside and smaller cities in the interior, dispersing discontent.
Jon Erik Dølvik and Andrew Martin (eds)
- Published in print:
- 2014
- Published Online:
- January 2015
- ISBN:
- 9780198717966
- eISBN:
- 9780191787423
- Item type:
- book
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780198717966.001.0001
- Subject:
- Political Science, Political Economy, Comparative Politics
The basic issues contested in public controversy over European social models have concerned their effects on employment and inequality, and ultimately whether there is necessarily a trade-off between ...
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The basic issues contested in public controversy over European social models have concerned their effects on employment and inequality, and ultimately whether there is necessarily a trade-off between higher employment and lower inequality. Understanding social models as the constellation of welfare state, employment relations, and educational institutions that jointly structure the supply side of the labor market, this book revisits those issues. It considers them in the light of the tumultuous developments shaping the demand-side environment in which the social models have evolved over the past quarter century. These extend from the deep Europe-wide recession precipitated by the end of Germany’s post-unification boom to the Great Recession triggered by the late 2000s financial meltdown, with the establishment of EMU in between. Case studies of 11 West European countries, in and out of EMU and EU and varying in their social models, economic structures, and size, comprise the empirical core of the book. Drawing on them and other research, the book argues that whether higher employment can be combined with lower inequality depends not only on how social models counteract markets’ tendency to generate inequality, but also on how effectively the institutions of economic governance assures the macroeconomic conditions for employment and the resources for egalitarian social and educational policy by counteracting markets’ tendency to generate macroeconomic instability. Given the massive failure to do so by Europe’s economic governance institutions, particularly those of the Eurozone, the book concludes that its socially destructive effects vastly outweigh whatever effects the diverse social models have had in aggravating or ameliorating the impact of the crisis.Less
The basic issues contested in public controversy over European social models have concerned their effects on employment and inequality, and ultimately whether there is necessarily a trade-off between higher employment and lower inequality. Understanding social models as the constellation of welfare state, employment relations, and educational institutions that jointly structure the supply side of the labor market, this book revisits those issues. It considers them in the light of the tumultuous developments shaping the demand-side environment in which the social models have evolved over the past quarter century. These extend from the deep Europe-wide recession precipitated by the end of Germany’s post-unification boom to the Great Recession triggered by the late 2000s financial meltdown, with the establishment of EMU in between. Case studies of 11 West European countries, in and out of EMU and EU and varying in their social models, economic structures, and size, comprise the empirical core of the book. Drawing on them and other research, the book argues that whether higher employment can be combined with lower inequality depends not only on how social models counteract markets’ tendency to generate inequality, but also on how effectively the institutions of economic governance assures the macroeconomic conditions for employment and the resources for egalitarian social and educational policy by counteracting markets’ tendency to generate macroeconomic instability. Given the massive failure to do so by Europe’s economic governance institutions, particularly those of the Eurozone, the book concludes that its socially destructive effects vastly outweigh whatever effects the diverse social models have had in aggravating or ameliorating the impact of the crisis.
Morgan Ricks
- Published in print:
- 2016
- Published Online:
- September 2016
- ISBN:
- 9780226330327
- eISBN:
- 9780226330464
- Item type:
- chapter
- Publisher:
- University of Chicago Press
- DOI:
- 10.7208/chicago/9780226330464.003.0005
- Subject:
- Law, Company and Commercial Law
This chapter argues that panics—widespread redemptions of short-term debt—should be viewed as the central problem for financial stability policy. This is not a novel argument, but it is a ...
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This chapter argues that panics—widespread redemptions of short-term debt—should be viewed as the central problem for financial stability policy. This is not a novel argument, but it is a surprisingly controversial one. It is common today to see panics as mere symptoms or manifestations of other, purportedly more “fundamental” problems: “debt-fueled bubbles,” “overleverage,” “excessive risk-taking,” and so on. The chapter makes the case that these other phenomena are unlikely to pose a grave threat to the broader economy in the absence of a panic. The chapter adduces evidence from the recent financial crisis and the Great Recession, and from previous historical episodes, in support of this position. The chapter focuses on a particular mechanism through which panics damage the broader economy—the “panic-induced financing crunch”—and it suggests that financial market anomalies during the recent crisis provide dramatic evidence that this mechanism was at work. The chapter concludes that panic-proofing, as opposed to, say, debt-fueled bubble prevention or “systemic risk” mitigation, should be the main objective of financial stability policy.Less
This chapter argues that panics—widespread redemptions of short-term debt—should be viewed as the central problem for financial stability policy. This is not a novel argument, but it is a surprisingly controversial one. It is common today to see panics as mere symptoms or manifestations of other, purportedly more “fundamental” problems: “debt-fueled bubbles,” “overleverage,” “excessive risk-taking,” and so on. The chapter makes the case that these other phenomena are unlikely to pose a grave threat to the broader economy in the absence of a panic. The chapter adduces evidence from the recent financial crisis and the Great Recession, and from previous historical episodes, in support of this position. The chapter focuses on a particular mechanism through which panics damage the broader economy—the “panic-induced financing crunch”—and it suggests that financial market anomalies during the recent crisis provide dramatic evidence that this mechanism was at work. The chapter concludes that panic-proofing, as opposed to, say, debt-fueled bubble prevention or “systemic risk” mitigation, should be the main objective of financial stability policy.
Morgan Ricks
- Published in print:
- 2016
- Published Online:
- September 2016
- ISBN:
- 9780226330327
- eISBN:
- 9780226330464
- Item type:
- chapter
- Publisher:
- University of Chicago Press
- DOI:
- 10.7208/chicago/9780226330464.003.0005
- Subject:
- Law, Company and Commercial Law
This chapter argues that panics—widespread redemptions of short-term debt—should be viewed as the central problem for financial stability policy. This is not a novel argument, but it is a ...
More
This chapter argues that panics—widespread redemptions of short-term debt—should be viewed as the central problem for financial stability policy. This is not a novel argument, but it is a surprisingly controversial one. It is common today to see panics as mere symptoms or manifestations of other, purportedly more “fundamental” problems: “debt-fueled bubbles,” “overleverage,” “excessive risk-taking,” and so on. The chapter makes the case that these other phenomena are unlikely to pose a grave threat to the broader economy in the absence of a panic. The chapter adduces evidence from the recent financial crisis and the Great Recession, and from previous historical episodes, in support of this position. The chapter focuses on a particular mechanism through which panics damage the broader economy—the “panic-induced financing crunch”—and it suggests that financial market anomalies during the recent crisis provide dramatic evidence that this mechanism was at work. The chapter concludes that panic-proofing, as opposed to, say, debt-fueled bubble prevention or “systemic risk” mitigation, should be the main objective of financial stability policy.
Less
This chapter argues that panics—widespread redemptions of short-term debt—should be viewed as the central problem for financial stability policy. This is not a novel argument, but it is a surprisingly controversial one. It is common today to see panics as mere symptoms or manifestations of other, purportedly more “fundamental” problems: “debt-fueled bubbles,” “overleverage,” “excessive risk-taking,” and so on. The chapter makes the case that these other phenomena are unlikely to pose a grave threat to the broader economy in the absence of a panic. The chapter adduces evidence from the recent financial crisis and the Great Recession, and from previous historical episodes, in support of this position. The chapter focuses on a particular mechanism through which panics damage the broader economy—the “panic-induced financing crunch”—and it suggests that financial market anomalies during the recent crisis provide dramatic evidence that this mechanism was at work. The chapter concludes that panic-proofing, as opposed to, say, debt-fueled bubble prevention or “systemic risk” mitigation, should be the main objective of financial stability policy.
Barry Z. Cynamon and Steven M. Fazzari
- Published in print:
- 2014
- Published Online:
- December 2014
- ISBN:
- 9780199988488
- eISBN:
- 9780190218249
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199988488.003.0002
- Subject:
- Social Work, Social Policy, Research and Evaluation
Economic theory suggests that rising income inequality reduces economic growth because high-income groups spend a smaller share of their income than do lower-income groups. Despite rising inequality, ...
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Economic theory suggests that rising income inequality reduces economic growth because high-income groups spend a smaller share of their income than do lower-income groups. Despite rising inequality, however, the US economy performed rather well during the 30 years before the Great Recession. This chapter analyzes this paradox by disaggregating household spending, income, saving, and debt for the bottom 95 percent and top 5 percent of the income distribution. We find that the high-income group spends a smaller share of income but that demand drag did not occur because the bottom 95 percent’s spending share rose along with a historic increase in borrowing. The unsustainable rise in household leverage, concentrated in the bottom 95 percent, ultimately spawned the Great Recession. The demand drag of rising inequality reasserts itself in the stagnant recovery from the Great Recession, and we explore structural changes to revive future demand growth.Less
Economic theory suggests that rising income inequality reduces economic growth because high-income groups spend a smaller share of their income than do lower-income groups. Despite rising inequality, however, the US economy performed rather well during the 30 years before the Great Recession. This chapter analyzes this paradox by disaggregating household spending, income, saving, and debt for the bottom 95 percent and top 5 percent of the income distribution. We find that the high-income group spends a smaller share of income but that demand drag did not occur because the bottom 95 percent’s spending share rose along with a historic increase in borrowing. The unsustainable rise in household leverage, concentrated in the bottom 95 percent, ultimately spawned the Great Recession. The demand drag of rising inequality reasserts itself in the stagnant recovery from the Great Recession, and we explore structural changes to revive future demand growth.
