Global Financial Crisis Globalization Unit Lesson 4

Objectives Explore events leading up to financial crisis that struck the US and the world in 2008. Interpret political cartoons relating to global economic crisis. Consider the connections between globalization and the current economic crisis. Describe current Eurozone crisis.

Warm Up IMF – short term assistance What’s the difference between the IMF and the World Bank? IMF – short term assistance World Bank – long term dvpt aid

Subprime Mortgage Crisis 2008 US Financial crisis Subprime Mortgage Crisis Global Effects Global Pool $  MBS ’06 Housing Bubble Bursts  Bankruptcies & Defaults  AIG Can’t Cover CDS Investment banks  massive losses Fed Reserve (TARP) & EU inject billions No lending/credit Internatl trade ↓, economies slow Stock values ↓ Low interest rates = weaker US $ = less profit trade partners

Eurozone EU (28) Eurozone Free mvmt people, goods, services, & capital European Commission Eurozone 19 who use same currency (euro) European Central Bank (monetary policy) Separate national fiscal policies (budgets)

Eurozone debt Crisis When: Late 2009 Why: Government Debts, Banking & Housing Crisis (similar to US – pool & securitize investments) & Slow, Uneven Economic Growth Where: PIIGS and others Who’s In Charge: European Commission, European Central Bank (ECB), IMF How Fix: Bailouts, Lower Interest Rates, Austerity Budgets Consequences: Economic & Political Changes, Social Upheaval Additional video explanations at CNN Explains http://youtu.be/35X3Odv4_bo NY Times http://www.nytimes.com/video/business/1247467933725/explaining-europe-s-debt-crisis.html

Results Moderate Recovery Debt Remains (Greece, Spain) Exiting Euro?

Activity Video “Global Economic Issues”

Closure Taking into account everything you’ve learned, should the global economy be better regulated? What impact may these regulations have?