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The 2008 Economic Crisis: The Failure of Economists
Transcript of The 2008 Economic Crisis: The Failure of Economists
See This Coming Conclusion Introduction “As we saw in 2007 and 2008 economic volatility, a bit like energy, cannot bedestroyed, only switched from one form to another.”
- James Saft *Disequilibrium Between Departments
*OCC, Tendency for the Rate of Profit to Fall and Countervailing Tendencies
*Role of Fictitious Capital, Speculation and Credit
*Interruptions in the Circuit M-C(ML + LP) ...P... -C'-M' Class Antagonism, Use Value vs Exchange Value - The market is a free/efficient entity; can self-regulate itself by determining and setting the prices
- All fluctuations will be taken care of by the market How the progress of an economy should be assessed (Real versus the financial economy) - Homeownership expansionary policy pursued by both Clinton and Bush’s administration
- Irrational borrowing and flawed financial modeling
- Assumption that mortgage price will never experience a downturn; it will always rise (Pritchard 2012)
- Conditions were not built into the models used to assess risk - The rationalization and romanticization of market efficiency, free markets as necessarily implying rational markets
- The rationalization and romanticization capitalism as a flawless or almost flawless system and man’s rational ability to interact with market (Krugman 2009; Statman 2010) - The rationalization of the mortgage sector as a rational sector where bubbles cannot occur
- Investors are rational individuals who will sell and buy at the right price Subprime loans and mortages Crash of the market Economic Recession Deregulation of the financial sector Assumption that the market is efficient and self-regulating Based off ties to financial sector “…macroeconomics in this original sense has succeeded:
Its central problem of depression-prevention has been solved, for all
practical purposes, and has in fact been solved for many decades”
- Dr. Robert Lucas, Nobel-Prize winning Economist/Professor at the University of Chicago