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