ECON 403 Topics in Macroeconomics Fall 2012 MW 4 – 5:15 pm BEH 108 Instructor: Bernard Malamud Office: Beh 502Phone: 895 – Office Hours: MW 11:30 – 12:30, 2:30 – 3:30 pm and by appointment Course website at: faculty.unlv.edu/bmalamud

Tulipmania, Not clear how the bubble was financed/fueled. Land for tulips?

Bubbles of Note Mississippi Bubble, John Law Bank RoyaleCompany of the West (Paper Money)(Mississippi Company) The bubble animated:

South Sea Bubble Bubble as scam: Insiders bought shares with loans backed by shares Bubble as laughs: Observations on our bubble, Richard Koo:

Catalog of Panics, Crises, Collapses: The US Experience 1780s: Post-war reconversion  recession  declining commodity prices  farmers squeezed  tax collections opposed (Shay’s Rebellion)  Constitution adopted to establish federal gov’t credit 1819: War of 1812  Boom and inflation  Tightening by 2 nd Bank -  Crisis: Bank failures/Deflation/Defaults/Unemploymt 1837: 2 nd Bank of US lost charter  State bank inflation of M s  Speculative bubble in land  Bank failures, etc. 1857: Speculation in railroad stocks  Failure of Ohio Life Insur. Co.  Tightening by NY banks  Bank runs Post Civil War: Business cycles driven by spurts and stops of railroad construction in face of generally tight money tied to gold standard.

Catalog of Panics, Crises, Collapses: The US Experience The Long Depression, 1873 – 1896 Deflation to return to gold (1865 – 1879) + Budget surpluses to repay Civil War debt (1865 – 1890) + Gold standard discipline after 1879  Tight money + Rapid Economic Growth  Deflation  Expected deflation  Gold Inflows  Rapid Growth  Deflation 1873: Vienna Stock Market Crash  Failure of Jay Cooke & Company  I down  Y down  $ appreciation  Deflation  Nominal wage down but real wage up  Debt burden up 1884: European harvest cycle  Gold In…then…Gold out  US business cycle 1890: Argentine default  Baring Bros. Failure  Intl contagion 1893: Fear of silver  Capital flight from US  Recession 1907: Commodity speculation  Knickerbocker Bank failure  JP Morgan as lender of last resort  Establishment of Fed : Post-WWI reconversion + Tight Money (to put labor in its place)  Short, sharp engineered recession