Professional Documents
Culture Documents
Recession?
Eric Tymoigne
Lewis and Clark College, Economics
March 2014
2008: "Why did nobody notice it?"
Consensus: Nobody Saw It Coming
Robert Rubin: "few, if any people anticipated the sort
of meltdown that we are seeing in the credit markets at
present.
Glenn Stevens, Governor of the Reserve Bank of
Australia: I do not know anyone who predicted this
course of events.
Alan Greenspan: Once-in-a-century credit tsunami
Hyman P. Minsky
Stability is destabilizing
My research: Using Minskys
analytical framework to understand
the
Great Recession
Long periods of economic prosperity lead to the growth of financial fragility
i.e. growing use of debt.
Overtime the debt accumulated becomes unsustainable => financial crisis
The great recession has its root in the 1980s with the growth MONEY
MANAGER CAPITALISM:
Growing role of finance for the determination of economic outcome
Increasing reliance on debt to sustain standard of living
Increasing reliance on financial gains to make a living and guide incentives (online trading, pension
funds, mutual funds, stock-options instead of salaries to reward top managers)
Deregulation of economy and retrenchment of government in economic activity:
finance, labor, health, education => depressed wages, shift of burden on workers,
growing inequalities
Fiscal austerity: promotion of fiscal surplus forced private sector into debt
(accounting: someone must be in deficit if someone else is in surplus).
Develop a measure of financial
fragility
Financial Fragility Index and Heat Map, (1996 = 100)
Estimating the Cost of a Job Guarantee Program,
Experience from the New Deal Programs
Less 5 to 10 to 15 to 20 or
Unemployment Rate
than 5 9.99 14.99 19.99 more
Earnings to GNP,
0.63 1.86 2.09 1.72
Actual 0.15
Earnings to GNP, FE 0.64 1.81 4.43 7.41 11.25
Earnings to GNP, FE
2.15 5.21 8.91 14.53
+ ELW 0.78
Earnings to GNP, FE
2.81 6.55 11.16 18.09
+ MLW 1.04
Total Cost to GNP,
1.03 2.42 2.64 2.12
Actual 0.34
Total Cost to GNP, FE 0.85 2.41 5.90 9.88 14.99
Estimated Average
Total Cost to GNP, FE of the Cost of JG for Four Different
Scenarios, GNP 2.87
+ ELW Percent of 1.04
6.95 11.88 19.37
Total Cost to GNP, FE
Actual Cost of Work Programs Relative to GNP. All unemployed are enrolled. Paid
3.74 two 8.74
possible14.88
wages 24.12
+ MLW 1.39
Problem: Only 30% of unemployed and not paid
enough to sustained their family