Transcript How did public ignorance contribute to the economic

By Katey, Brandon, Mikey, and Dylan
Date: 2/22/13
Answer:
 Public ignorance contributed to the great recession by
allowing the CEOs and other business leaders to run
unopposed by the masses. Also the public ignorance
made it so that people accepted loans and such that
they couldn’t pay back without thinking of the possible
consequences.
Walden
 “No way of thinking or doing, however ancient, can be trusted without
proof. What everybody echoes or in silence passes by as true to-day
may turn out to be falsehood to-morrow, mere smoke of opinion,
which some had trusted for a cloud that would sprinkle fertilizing rain
on their fields.”(Economy p.3)
 Thoreau explains how people blindly follow others without any form of
confirmation that the path they follow is correct. The U.S. citizens
blindly followed the advice of rating agencies and bankers who
suggested loans without the understanding that they wouldn’t be able
to pay it back.
Inside Job
 The director of this documentary made the effects of public ignorance
very clear. As people began getting loans and the house prices started
to rise no one took a second to step back and say “hey wait a minute
this isn’t right”. After the pop of the housing bubble, foreclosures
quadrupled and tuition rose dramatically for universities. Had anyone
realized that they were being swindled then perhaps we would never
have gone through this tragedy.
The Great Recession of 2008-2009: Causes,
Consequences and Policy Responses
 “Firstly, contrary to widely-held perceptions
during the boom years before the crisis, the
paper underscores that the global economy was
by no means as stable as suggested, while at the
same time the majority of the world’s poor had
benefited insufficiently from stronger
economic growth.”(Abstract)
 This researcher suggests that people accepted
the change with open arms and didn’t realize
they had a bad economy to begin with. He
believes that the actual state of the global
economy was withheld from everyone and that
people were unable to make an informed
decision on their monetary actions.
Causes of Economic Recession
 “Irrational exuberance in the housing market led many people to buy
houses they couldn't afford, because everyone thought housing prices
could only go up. In 2006, the bubble burst as housing prices started to
decline. This caught many homeowners off guard, who had taken loans
with little money down. As they realized they would lose money by
selling the house for less than their mortgage, they foreclosed.”
 This article explains how public ignorance allowed people to buy things
well out of their own monetary reach which led to the housing bubble
and the eventual pop of said bubble. This is close to the same buying
on credit that caused the stock market crash which led to the great
depression.
Causes of Great Recession

“Some economists—including those of the Austrian School and those predicting the recession
such as Steve Keen—claim that the ultimate point of origin of the great financial crisis of 2007–
2010 can be traced back to an extremely indebted US economy. The collapse of the real estate
market in 2006 was the close point of origin of the crisis. The failure rates of subprime mortgages
were the first symptom of a credit boom tuned to bust and of a real estate shock. But large default
rates on subprime mortgages cannot account for the severity of the crisis. Rather, low-quality
mortgages acted as an accelerant to the fire that spread through the entire financial system. ”
 This article shows how the increasing debt and lowered interest rate
contributed to the crisis. Public ignorance ties into this because the
people didn’t realize the interest dropped as their debt increased.
Had they realized this they may have been able to fix it.
A historical perspective on the Great
Recession
 “The Great Recession of 2008/9 came as a big shock to economists as well as the general
public. They had become accustomed to the serene conditions of the so-called Great
Moderation – low inflation, smooth growth, and low unemployment. This led to
triumphalist claims that “boom and bust” had been abolished.”
 This article gives a detailed insight into how certain aspects of the recession played into
public ignorance. People already had a belief that eventually the economy would even
out and become normalized with no recessions and booms. This idea could provide a
possible explanation as to why the public was ignorant. Maybe they wanted the economy
to be good so badly they didn’t question it.
Works Cited
 Amadeo, Kimberly. "Causes of Economic Recession." About.com US Economy.
About.com, 06 July 2012. Web. 23 Feb. 2013.
<http://useconomy.about.com/od/grossdomesticproduct/a/cause_recession.htm>.
 "Causes of the Great Recession." Wikipedia. Wikimedia Foundation, 22 Jan. 2013. Web. 21
Feb. 2013. <http://en.wikipedia.org/wiki/Causes_of_the_Great_Recession>.
 Crafts, Nicholas. "Vox." The Great Recession: An Historical Perspective. Vox, 24 Feb. 2011.
Web. 23 Feb. 2013. <http://www.voxeu.org/article/great-recession-historicalperspective>.
 Verick, Sher, and Iyanatul Islam. The Great Recession of 2008-2009: Causes,
Consequences, and Policy Responses. IZA Discussion Paper Series. The Institute for the
Study of Labor (IZA), May 2010. Web. 21 Feb. 2013. http://ftp.iza.org/dp4934.pdf
 Thoreau, Henry David. “Walden” Ticknor and Fields: Boston. Published August 9, 1854.
Accessed 21 Feb. 2013.
 Inside Job. Dir. Charles Ferguson. By Charles Ferguson, Chad Beck, and Adam Bolt.
Perf. Matt Damon, William Ackman, Daniel Alpert. Sony Pictures Classics, 2010. DVD.