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					Great Depression
   • 29 October 1929 => Black Tuesday
                   actually 24 oct black Thursday start, catastrophic downturn on 28
                   black Monday and 29
   • Worldwide economic downturn
   • largest and most important economic depression in modern history
   • End of depression associated with start of the war economy of WWII

New Deal
  • shorthand for a host of government programmes introduced between 1933 and
     1938
  • (They were introduced by) President F.D. Roosevelt
           phrase itself originates in FDR's acceptance speech at the 1932
           Democratic convention in Chicago, in which he promised "a new deal for
           the American people"
  • The various measures:
         – Support for, and reform of, the collapsing banking industry
         – A new stock market regulatory agency
                   Security and Exchange Commission
         – Moves to boost wages and prices
         – The creation of massive public works projects
         – (most important) The launch of Social Security
  • By 1943, many of its programs had been abolished

Taken together, they not only constituted a "New Deal" to help ordinary Americans. They
also initiated a new era of government activism, in terms of both intervention and
regulation of the economy. Many New Deal programmes still exist, part of a safety net
that even today's most laissez-faire rightwingers in the US would not dare touch.


Wall Street
  • Financial centre of the USA
  • Situated in lower and mid-town Manhattan, NYC
  • On Wall Street you can find:
          – Business institutions
                   such as stockbrokers and financial companies
          – Banks
                   such as Citicorp and Bank of America
          – Insurance corporations
          – Commodity exchanges
                   that deal in things like coffee, cotton, corn or metal
          – The New York Stock Exchange
          – World’s largest gold vault at Federal Reserve Bank

These institutions deal with huge sums of money and control and invest much of
Americans’ capital. So when the shit hits the fan there, the whole US is in trouble
   •   NYSE internationally known for its Dow Jones Average
             list which contains the prices of stock and bonds in selected industrial and
             commercial companies on the NYSE. Adjusted throughout the working
             day and its movements are shown in points. Dow Jones influential and
             international financiers, investors and governments see it as an accurate
             indicator of the USA’s economic health.

Slide Dow Jones
Tell about drop in Dow Jones, loss of 35,4% of its value in 1 year

The banking system
    Americans always been suspicious of banks
             Fears revive when the stock market performs badly (1987, 2001 and now)
             2004 polls: only 19% of respondents supported banks or were positive
             about them
    US law supposed to regulate the banking system and curb any excessive growth of
     individual banks
    About 12,000 different commercial banks in the USA
             provide personal and corporate financial services for clients
    Some banks incorporated (or licensed) under national charter => National Banks
    Others regulated under state charters ((voor)recht, een recht/octrooi verlenen aan)
    Banking system increasingly deregulated (to allow other financial competitors),
     banks have moved into new (and riskier) areas
             securities trading, currency-dealing and insurance.

   In light of the current credit crunch, the book said this in 2005:
   It is argued that the banking system is not as closely regulated at federal and state
   level as it should be, particularly at a time when financial institutions are expanding
   and when fraud and bank collapsing still occur. Critics argue for more accountability
   and far more control and regulation over American financial markets

   Federal Reserve System aka Fed
       created in 1913
       similar to central or national banks in other countries
       Comprises of 12 Federal Reserve Districts throughout USA, each with
        individual Federal Reserve Bank
       Supervised in Washington be a Board of Governors, headed by an influential
        Chairman
                     Governors appointed by President, confirmed by Senate
                     independent, so don’t always agree with government politics
                     However, US treasury department (federal financial department)
                     does generally word closely with Fed
       Sets the minimum financial reserves that must be held by commercial banks
        for them to operate
       Tasks of the Federal Reserve:
            Adjusts interest rates
            controls the money supply in the economy
            tries to reduce inflation
            issues bank notes
            implements US monetary policy
            attempts to create a stable environment for corporate activity
          Sixty percent of commercial banks are members of the Federal Reserve =>
           hold ¾ of bank deposits


Credit Crisis

The financial crisis of 2007–2008, initially referred to in the media as a "credit crunch"
or "credit crisis", began in July 2007 when a loss of confidence by investors in the value
of securitized mortgages in the United States resulted in a liquidity crisis that prompted a
substantial injection of capital into financial markets by the United States Federal
Reserve and the European Central Bank. The TED spread, an indicator of perceived
credit risk in the general economy, spiked up in July 2007, remained volatile for a year,
then spiked even higher in September 2008, reaching a record 4.65% on October 10,
2008. In September 2008, the crisis deepened, as stock markets world-wide crashed and
entered a period of high volatility, and a considerable number of banking, mortgage and
insurance company failures in the following weeks.

Although America's housing collapse is often cited as having caused the crisis, the
financial system was vulnerable because of intricate and over-leveraged financial
contracts and operations, a U.S. monetary policy making the cost of credit negligible
therefore encouraging such over-leverage, and generally an "hypertrophy of the financial
sector" (financialization).

Another Great Depression

Yes...
* The banks may have money, but how to make them lend it?
* Financial globalisation guarantees the crisis will spread, whatever countries do.
* This bubble was 20 years in the making, twice as long as the one which burst in 1929

No...
* The crisis in the real economy is nowhere near as severe. The US is still growing.
* Regulators have learnt their lessons, and won't make the mistakes of the 1930s again
* The world economy is less US-centred, reducing the risk of contagion

				
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