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Professor of EconomicsThomas R. Brown
Professor in Economics Education
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THE “GREAT RECESSION” HAS BEEN OFFICIALLY OVER FOR ALMOST THREE YEARS!
OFFICIALLY STARTEDDECEMBER 2007
OFFICIALLY ENDEDJUNE 2009
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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
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GOVERNMENT POLICY
COMMODITY INFLATION
MORAL HAZARD
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CHANGE IN HOW WE CALCULATE INFLATION
EVERYONE SHOULD OWN A HOME CHANGE IN TAX LAWS REPEAL GLASS/STEAGALL ACT MORTGAGE FINANCE GIANTS
FANNIE MAEFREDIE MAC
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2003-2004 FED FUNDS RATES LOWER THAN ANY TIME SINCE THE SERIESBEGAN IN 1955
RECORD U.S. TRADE DEFICITS
GLUT OF WORLD SAVINGS
LOW WORLD INTEREST RATES
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MORTGAGED BACKED SECURITIES
WORLD MARKET FOR THE SECURITIES
UNDERESTIMATION OF RISK
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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.
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BANKS
MORTGAGE BROKERS
REAL ESTATE APRAISERS
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SECURITY BROKERS
RATING AGENCIES
HOME BUYERS
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HOUSING BUBBLE STARTED TO BURST IN 2006
AMERICAN’S DREAM STARTS TO BECOMEAMERICA’S NIGHTMARE
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COMMODITY PRICES HIT RECORD HIGHS IN THE SUMMER OF 2008
RECORDSOIL PICES $147/BARRELGASOLINE PRICES $4.00/GALCORN PRICES $5.75/BU
INELASTIC DEMAND FOR THESE COMMODITIES
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SEPTEMBER 2008
WORLD CREDIT MARKETS FREEZE
REAL RISK OF WORLD DEPRESSION