1. 17 October 2016 by Sigrid Brevik Wangsness
The US Economy II
17 October 2016 by
Sigrid Brevik Wangsness

2. IV.The U.S. Economy Today (2016)
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?  

3. What went wrong in 2008? The Major Causes of the Financial Crisis
Collapse of the housing market
The property bubble burst: House prices
dropped dramatically
Sub-prime loans
= risky loans (mortgage loans for borrowers
with a poor credit history)

4. The Major Causes of the Financial Crisis:
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”

5. The Crisis of Credit Vocabulary To default Treasury bills
Leverage Interest
Homeowners Broker
Mortgage lender AAA rating
Investment banker Prices plummet
Credit Default Swap Foreclose

6. The Major Causes of the Financial Crisis:
Speculation and excessive risks on the stock markets
Lack of trust
Free fall of share prices
Insufficient regulatory system
Deregulation encouraged “gambling”.
Repeal (official end) of Glass-Steagall Act in
1999.

7. The Major Causes of the Financial Crisis:
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?

8. Attempts at Solving the Crisis:
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”

9. Attempts at Solving the Crisis:
Part –nationalization of American banks
Cooperation between major economies:
Summits (G20), co-ordinated efforts
The IMF

10. Does history repeat itself?

11. Robert Reich, Professor at Berkely: Two peak years for income concentration

12. Problems in the US Economy
National Debt
  USD 19.7 trillion ($19,698,178,798,454.78).
Trade Deficit 
Current-account balance: -$488bn (Q2)
-2.6% of GDP in 2016 (forecast)
Budget Deficit
Budget balance: -3.2% of GDP in 2016 (forecast)
Income inequality
The gap is widening

13. Economic Indicators (October 2016)
GDP: % growth in Q2, 2016
  Forecast for 2016: +1.5%
Inflation: +1.1% (Aug. 2016)
Forecast for 2016: +1.3%
Unemployment: 4.9% (Aug. 2016)

14. V. Changes in the US Labour Market
(See article in the Comp.)
The Primary Sector
The Secondary Sector
 The Tertiary Sector

15. VI. US Financial Institutions
The Fed
Head of the Fed”: Janet Yellen
Organization
Appointment
Key powers: Monetary Policy
Banking Regulations
Wall Street
NYSE, AMEX, NASDAQ
Banks, insurance companies,
rating agencies, brokers, asset
managers etc.

16. President Obama: «The Way Ahead»
Four major structural challenges:
1. Boosting productivity growth
2. Combating rising inequality
3. Ensuring that everyone who wants a job
can get one
4. Building a resilient economy that is primed
for future growth
The Economist, October 8th, 2016