1929- Stock Market Crash
1933- Glass-Steagall Act→Issued bank deposits in commercial banks and divided responsibilities of commercial and investment banks
1995-Congress deregulates banking industry, repeals Glass-Steagall; banks and investment firms can join together, use more savings for investment.
1983-’07-expansion in U.S. economy (with mild recessions in ’88, ’91, ‘00)→ deregulation (fewer gov’t regulations on economy), lower interest rates (FED)
2001-’07- speculation in housing market→ House prices rose dramatically
Banks start issuing “sub-prime” mortgages, “no-doc” mortgages
Securitized mortgage investments- “derivatives”
Credit Default Swaps- banks take out insurance on debt/ risky mortgages.
1.Lending for homes (banks)
2.Investing in mortgages (investment firms, banks, private investors)
3. Buying a home (potential homeowners)
Dodd Frank- 2010
-Early ’09 Federal government passes TARP = 700 billion “bail out” of affected banks, insurance carriers, and even auto companies.
-2009-’14- slow recovery, unemployment now at 6.1%
-3 forms that humans have used to organize society to insure survival:
1. Tradition- economic decisions made by tradition passed from father to son, generation-to-generation, etc.
2. Command or Authoritarian Rule- economic decisions made by rule od authority. I.E.) Communism
3. Market- economic decisions made by individuals.
3 Factors of Production: Land, Labor, and capital. Land- natural resources Labor- human effort Capital- man-made items used for production (i.e. technology, cash$$$)
Scarcity- #1 economic issue is scarce resources with unlimited wants.
Economics- study of how societies organize to solve scarcity
Market Economy- efficient
1. Scarcity- means choices, central problem for all economies/ society. Resources are scarce and choices must be made.
2. Opportunity cost-that,