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The current crisis

The current crisis. Points covered in this lecture: Background to the crisis (debt; aftermath of recession in early 2000s). Banks and mortgages. Subprime, securitization and credit default swaps. Collapse and bailout. Globalization of the crisis. The background.

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The current crisis

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  1. The current crisis Points covered in this lecture: • Background to the crisis (debt; aftermath of recession in early 2000s). • Banks and mortgages. • Subprime, securitization and credit default swaps. • Collapse and bailout. • Globalization of the crisis.

  2. The background Debt: real wage decline and increased indebtedness since 1970s. 2000-02: stock market crash prompting low interest rates. Rising house prices as collateral on loans.

  3. The banking system 1933: Glass-Steagall Act (repealed 1999) “Old-style” banking 1999: Gramm-Leach-Blilely Act “New-style” banking and mortgage products

  4. Subprime and securitization What happens to a mortgage once it has been made? Why do banks lend to high-risk customers? Who buys “toxic” assets and why?

  5. Credit default swaps Insurance Gambling The demise if AIG (2008)

  6. Why did it collapse and what happened in the aftermath? Housing market collapse and foreclosure “Bail-out”: was there an alternative and whom did it help? Were there alternatives?

  7. Globalizing the crisis What does the future hold? The latest news…

  8. Word list kilter (p. 2) unbridled (p. 3) lure (p. 6) parsing (p. 6) tout (p. 7) vilification (p. 10) glibly; pittance (p. 12)

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