Professor of Economics Thomas R. Brown Professor in Economics Education

THE “GREAT RECESSION” HAS BEEN OFFICIALLY OVER FOR ALMOST THREE YEARS! OFFICIALLY STARTED DECEMBER 2007 OFFICIALLY ENDED JUNE 2009

THE GREAT RECESSION WAS THE LONGEST RECESSION SINCE THE GREAT DEPRESSION THE RECOVERY FROM THE RECESSION HAS BEEN THE WEAKEST IN THE POST WWII PERIOD

 GOVERNMENT POLICY  COMMODITY INFLATION  MORAL HAZARD

 CHANGE IN HOW WE CALCULATE INFLATION  EVERYONE SHOULD OWN A HOME  CHANGE IN TAX LAWS  REPEAL GLASS/STEAGALL ACT  MORTGAGE FINANCE GIANTS FANNIE MAE FREDIE MAC

 FED FUNDS RATES LOWER THAN ANY TIME SINCE THE SERIES BEGAN IN 1955 RECORD U.S. TRADE DEFICITS GLUT OF WORLD SAVINGS LOW WORLD INTEREST RATES

MORTGAGED BACKED SECURITIES WORLD MARKET FOR THE SECURITIES UNDERESTIMATION OF RISK

 A MORAL HAZARD IS A SITUATION WHERE THERE IS A TENDENCY TO TAKE UNDUE RISK BECAUSE THE COSTS ARE NOT BORNE BY THE PARTY TAKING THE RISK.

 BANKS  MORTGAGE BROKERS  REAL ESTATE APRAISERS

 SECURITY BROKERS  RATING AGENCIES  HOME BUYERS

HOUSING BUBBLE STARTED TO BURST IN 2006 AMERICAN’S DREAM STARTS TO BECOME AMERICA’S NIGHTMARE

 COMMODITY PRICES HIT RECORD HIGHS IN THE SUMMER OF 2008  RECORDS OIL PICES $147/BARREL GASOLINE PRICES $4.00/GAL CORN PRICES $5.75/BU INELASTIC DEMAND FOR THESE COMMODITIES

SEPTEMBER 2008 WORLD CREDIT MARKETS FREEZE REAL RISK OF WORLD DEPRESSION