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