The Great Recession

1. The Great Recession By:Helen Ma,Sydney Dodd, Tessa Lingbloom

2. Differences: Unlike the depression, it only took days (not years) for President Bush to intervene The depression’s price level fell (26.7%), while the recession’s price levels rose (2.5%) The depression’s effects were much harsher, and were finally eased by WW2’s manufacturing Similarities: • Both were caused by a large economic crash (the depression’s being the stock market vs. the recession’s housing bubble) • Before the crashes, it was common in both eras to buy on credit • Both were worsened by the federal reserve system (recession had easy money policies, while depression failed to help bank panic/reduced money quantity by ⅓) • Both had effects of large unemployment, and a decline in GDP • Both resulted in the closing of many businesses, with a decline in industrial averages • a primary cause in 1930=banking panic of 1930 (major banks fail), similar to recession’s panic after Lehman Brothers failed • Both affected world wide trade negatively • stock market went into downward spiral The Great recession/Great Depression

3. Key Dates, Macroeconomic Measures, Unemployment Dec 7, 2007- The Great Recession officially begins - unemployment constant at 5% 2008- - The federal gov’t takes over Fannie Mae and Freddie Mac (Mortgage Associations) - The Federal Reserve bails out insurance giant American International Group (AIG) - The Lehman Brothers (financial services) declares bankruptcy - Federal banking regulators shut down Washington Mutual Inc. - Chrysler eliminates a shift at assembly plant- 1,000 out of work - TARP (Troubled Asset Relief Program) signed by Bush -$700 billion - interest rate reduced to 0% - AIG (insurance giant) bailed out by Fed - TALF (Term Asset-backed securities loading facility) created - Gov’t bails out General Motors and Chrysler 2009- - June: the Recession officially ends after 18 months -October 2nd: unemployment peaks at 10% 2011 - Unemployment reaches below 9% in March, then below 8% in September

4. DIJA / GDP - Dow Jones Industrial Average (stock market) - Fell more than 50% in just 17 months. -On October 9, 2007, the Dow closed at its pre-recession all-time high of 14,164.43. - fourth quarter GDP growth was -1%, announcing the start of the recession. The Dow started declining -on Monday, September 15, 2008, Lehman Brothers declared bankruptcy. On Wednesday, panicky bankers withdrew $144 billion from money market funds, nearly causing a collapse - The Dow reached down to 6,594.44 on March 5, 2009 - fear of another Depression

5. Globalization -The era of neoliberal globalization-to eliminate anything that interfered with capitalists trying to maximize their profits by competing in markets. -Globalization created massive shifts in the labor supply in developing countries- corporations produced and sold goods directly and through suppliers and vendors around the world -not good news for American labor -Technological advances and globalization sparked “a huge and rapid increase” in the labor supply from workers in the developing world (China) -Inequality and the number of poor increased in most developing countries… slow wages -without any domestic financial markets to absorb the new wealth workers generated, a lot of money flowed into the U.S… -A bubble market ensued, and Americans thought they could buy everything- Spending, and borrowing, spun out of control. -The bubble eventually burst = foreclosures and expensive goods -This era marked by a string of global financial crises = The Great Recession

6. Effect on 2008 election:Obama v. McCain • Due to the economic situation, voters wanted change (which is exactly what Obama advocated) • With Obama’s effective campaigning, he received 53% of popular votes, even in typically republican states • Obama declared McCain as a ‘third Bush term’, the economy’s troubles giving the Democratic party an advantage • As a result of the election, the Democrats increased their majority in the House and Senate • Also, as a whole, the election of Obama opened up a new period of race relations

7. Economic Stimulus Act and American Recovery and Reinvestment Act Economic Stimulus Act (ESA): signed by Bush in 2008 • encouraged business investments • intended to boost economy Effects: cost total of $152 billion in 2008 • believed to increase the risks of recession American Recovery And Reinvestment Act (ARRA): signed by Obama in 2009 Primary objective: • save and create jobs • provide temporary relief programs • invest in infrastructure, education, health, and renewable energy Effects: did not achieve initial goals but did change GDP • some believed that ARRA pulled U.S. out of recession by creating jobs to prevent unemployment rate to drop • others think that ARRA was a waste of time and money ( cost $832 billion)

8. Debt between Bush and Obama Bush: Debt increased by $4.9 trillion • average of $410 billion in deficit spending per year • Unemployment rate rose to 7.2% from 4.3% • Poverty rate increased from 11.25% to 13.2% Obama: Debt increased by $6.5 trillion • average of $1.413 trillion in deficit spending per year • Obama’s first 2 years was 3x higher average deficit of Great Depression • Brought unemployment rate from 7.2% to 6.3%

9. Sources • Boushey, Heather. "It Wasn't Household Debt That Caused the Great Recession."The Atlantic. Atlantic Media Company, 21 May 2014. Web. 22 May 2014. • "Timeline on the Great Recession." The Christian Science Monitor. The Christian Science Monitor, 08 Sept. 2013. Web. 20 May 2014. • "The Great Recession." State of Working America. N.p., n.d. Web. 20 May 2014. • "Audio Script." U.S. Bureau of Labor Statistics. U.S. Bureau of Labor Statistics, n.d. Web. 22 May 2014. • Blinder, Alan S. How the Great Recession Was Brought to an End (n.d.): n. pag. Web. • Statisitcs, U.s. Bureau Of Labor. The Recession of 2007–2009: BLS Spotlight on Statistics (n.d.): n. pag. Web. • Jagannathan, Ravi. "What Really Spurred the Great Recession?" - Globalization and the U.S. Dollar Are as Much to Blame as Banks. Northwestern University, 1 July 2013. Web. 22 May 2014. • "Timeline on the Great Recession." The Christian Science Monitor. The Christian Science Monitor, 08 Sept. 2013. Web. 20 May 2014. • Herzog-Stein, Alexander. "Macroeconomic Implications of the German Short-time Work Policy during the Great Recession." - Herzog-Stein. N.p., 11 July 2013. Web. 22 May 2014.