1. The Second Brief History of the United States

2. Things to remember from last time
2nd Industrial Revolution launches US to #1 GDP
Prosperity in 1920’s leads to greater crash in 1929
The stock market crash reduced the economy by about 50%
The crash was caused by overspeculation
The Great Depression occurs

3. Herbert Hoover – lengthened the Depression
Herbert Hoover enacted higher taxes to boost the government’s budget deficit
He also signed the Smoot- Hawley Act
Charged high tariffs on foreign goods
Other countries retaliated
Unemployment – 25%, 1/3 of the money supply was gone

6. FDR – Created the New Deal which made some jobs
Franklin Delano Roosevelt created the New Deal which increased the size of the government and their involvement in the economy
Helped boost the U.S. economy out of the depression
Deficit spending was an idea espoused by John Maynard Keynes, the father of modern macro

7. Depression Data Table 2: Depression Data[33] 1929 1931 1933 1937 1938
1940
Real Gross National Product (GNP) 1
101.4
84.3
68.3
103.9
103.7
113.0
Consumer Price Index 2
122.5
108.7
92.4
102.7
99.4
100.2
Index of Industrial Production 2
109 75 69
112 89
126
Money Supply M2 ($ billions)
46.6
42.7
32.2
45.7
49.3
55.2
Exports ($ billions)
5.24
2.42
1.67
3.35
3.18
4.02
Unemployment (% of civilian work force)
3.1
16.1
25.2
13.8
16.5
13.9

8. WWII
The main reason for the United States’ economy flourishing through the 1940’s was the war economy driven by WWII
Six million women became new workers
After WWII, the suburbs grew out of pent-up demand for new housing
Eisenhower built the interstate highway system, strengthening our infrastructure

10. Postwar prosperity
The GI Bill encouraged many veterans to invest in their education.
Our productivity was increased greatly and our GDP grew
Kennedy cut taxes and the US went through a kind of golden age of economic growth
Gave people an opportunity to focus on other things
Music, Politics, being a hippie, etc

11. Under Lyndon Johnson, the government took greater control of the economy
The Great Society focused on Medicare, Medicaid, welfare initiatives, etc.
Johnson also wanted to complete the war in Vietnam, continue Cold War
This is a classic example of guns vs butter
Great Society

12. Inflation in the 1970’s
Under Presidents Nixon and Ford in the 1970’s the US suffered from increasing prices
Inflation – the increase in currency causes increasing prices, while the value of currency remains constant or decreases
Prices went up because of supply shocks

13. OPEC Organization of Petroleum Exporting Countries
Founded in the late 60’s
Saudi Arabia, Venezuela, Iraq
The US oil production peaked in 1970, so we had to rely on the higher prices of OPEC.
These higher prices were felt across the economy
The government experimented with price controls to stop inflation
Ford: “WIN” (Whip Inflation Now!)

15. Reaganomics In the early 1980’s there were back to back recessions
Prices stabilized
Reagan advocated for lowering taxes for the rich, lowering borrowing rates, and less intrusion of trade
Basically, the rich got very rich and the poor stayed sort of poor
This is the first use of “trickle down” economics
Let the rich control the wealth, and they will put it to the best use, and the money will eventually trickle down the economy into the pockets of the poor

16. Gini index
Gini index – remember it measures the inequality of the economy
0 means perfect equality
1 means 1 person has all of the money
Does trickle down really work?
Does income equality even matter?
Remember why minimum wage is ineffective

18. Clinton carried over some of other Democratic President’s ideas about economy, but largely let the economy loose
Like Reagan
In addition to some sweet music and hairstyles, the 90’s provided a growth in the economy due to the Technological Revolution
The advent of computers as a tool for businesses and consumers
The internet also aided in this revolution
The 90’s

20. 2001 – The Dot Com Recession
In late 2000 and early 2001, many new businesses were started because of the internet.
Stock speculation was high, and people rode the market wave on new innovative companies
Like Geocities, Hotmail, amazon, Ebay, pets.com
The market crashed once it was realized that ordering pets and groceries online was a dumb idea
Trust was lost in the internet: loss of trust -> crash

21. Dot Com Bubble Burst Bubble
Caused by “irrational exuberance” – Greenspan
Stock traders were overoptimistic about the impact of new start-up websites
When the bubble becomes over inflated it pops causing a market crash

22. The survivors prospered
Certain investors and CEOs survived and made goo-gobs of money in the second half of the 2000s
The war economy under George W. Bush also led to prosperity

23. The 2008 Housing Market Crash
We’ll get to this next week