Transcript US Economy II

5 October 2015
by
Sigrid Brevik Wangsness
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The largest economy in the world with a
major impact on the global economy
Until October 2008 an economic superpower
– did the financial crisis change that?
A significant characteristic of the US economy
is its resilience, i.e. its ability to bounce back
after slowdowns. Has this happened again?
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Collapse of the housing market
The property bubble burst: House prices
dropped dramatically
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Sub-prime loans
= risky loans (mortgage loans for borrowers
with a poor credit history)
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The banking crisis
Banks had granted too many risky loans
Bad debts – huge losses
Complicated financial instruments:
MBSs (mortgage-backed securities)
CDOs (collateralized debt obligations)
“Credit crunch”
Vocabulary
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To default
Leverage
Homeowners
Mortgage lender
Investment banker
Credit Default Swap
Treasury bills
Interest
Broker
AAA rating
Prices plummet
Foreclose
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Speculation and excessive risks on the stock
markets
Lack of trust
Free fall of share prices
Insufficient regulatory system
Deregulation encouraged “gambling”
Repeal of Glass-Steagall Act (1999)
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The Federal Reserve System (the Fed)
(= the US central bank)
Too low interest for too long? Too easy to
borrow from the Fed?
Did it therefore indirectly encourage
speculation?
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US government intervention in the economy
Rescue (bail-out) packages
The role of the Federal Reserve System
"Head of the Fed” at the time:
Ben Bernanke
“Quantitative easing”
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Part –nationalization of American banks
Cooperation between major economies:
Summits (G20), co-ordinated efforts
The IMF
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National Deficit/ Debt
USD 18.5 trillion. How serious is that?
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Trade Deficit
Current-account balance: -$429bn (Q2)
-2.6% of GDP in 2015 (forecast)
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Budget Deficit
Budget balance: -2.6% of GDP in 2015 (forecast)
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GDP:
+2.7% growth in Q2, 2015
Forecast for 2015: +2.4%
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Inflation: +0.2% (Aug. 2015)
Forecast for 2015: +0.4%
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Unemployment: 5.1% (Aug. 2015)
(See article in the Comp.)
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The Primary Sector
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The Secondary Sector
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The Tertiary Sector
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The Fed
o Head of the Fed”: Janet Yellen
o Organization
o Appointment
o Key powers: Monetary Policy
Banking Regulations
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Wall Street
o NYSE, AMEX, NASDAQ
o Banks, insurance companies,
rating agencies, brokers, asset
managers etc.