What happened to the world economy to cause the dramatic slowdown since 2008?

The 2008 recession was fear precipitated by the credit bubble stoked by the Fed and US banks 2001-2004, and the quick tightening 2004-2006.

Monetary policy always has a lag effect of a year or so. Hence the boom in debt 2002-2007, and the massive investment slowdown and confidence crash of 2008-2010.

Peter Schiff pls go

Every single growth slowdown occurs 1-2 years after the rate hike cycle begins1974-1975, 1980-1981, 1983, 1990-1991, 1995-1996, 2000-2001, 2007-2009.

We are currently slowing down again. It might be more like 1995-1996 instead.

In addition to this Bill Clinton repealed the glass-steagall act which led what should have been a normal housing bubble pop to a massive international financial clusterfuck

>The majority report of the U.S. Financial Crisis Inquiry Commission, composed of six Democratic and four Republican appointees, reported its findings in January 2011. It concluded that "the crisis was avoidable and was caused by: Widespread failures in financial regulation, including the Federal Reserve’s failure to stem the tide of toxic mortgages; Dramatic breakdowns in corporate governance including too many financial firms acting recklessly and taking on too much risk; An explosive mix of excessive borrowing and risk by households and Wall Street that put the financial system on a collision course with crisis; Key policy makers ill prepared for the crisis, lacking a full understanding of the financial system they oversaw; and systemic breaches in accountability and ethics at all levels."
en.wikipedia.org/wiki/Great_Recession

Republicans and Democrats voted for it. Clinton signed it

So, Capitalism?

Corruption and incompetence.

Reckless capitalism, maybe. A mythical "perfect capitalist" would never have taken on that much risk.

Lack of oversight over GSE

25 year rule.

2008 was a market failure on a massive scale. It was sparked by the government, but built by the capitalist system itself.

Therefore, like 1956-1958 is blamed on Maoism, 1970-1990 on Communism, and 1976 Cambodia on JUSTism, 2008 can be blamed on Capitalism.

Neoliberalism

>For the purpose of determining what is history, please do not start threads about events taking place less than 25 years ago.

Veeky Forums History & Humanities

Cont*

This is clearly an economics thread, which falls under Humanities and has since DAY 1 of this board.

You know that this thread is still against the spirit of not the wording of that rule.

Care elaborating?

Neoliberalism led to the 4-5% global growth rates of 1980-2007.

>against the spirit

>economics threads on this exact issue literally been discussed since day 1 when we actually had the mod who did his job, and also changed the picture to Herodotus.

The housing bubble obviously.

Look at how the system allowed risks to be covered up. Sub-prime mortgages were repackaged as "collateralized debt obligations" and the like and sold to banks like Lehman Brothers. Both deregulation and government assurances played a role in this.

The thing I hate the most is when there's a clearly off topic thread, but somehow a good discussion kicks off and then a dipshit mod decides to delete it 100 posts before bump limit.

Why exactly was it a "bubble"?
Nothing made the bubble "burst" until the Fed raised rates 4% in 2 years.

Okay.

Furthermore, why has the current economic expansion been so stable and consistent, yet also shit relative to the past?

The rules have been abused since day 1. Is this really news to you?

Okay?

I have violated no ruleFurthermore, economics up to 2016 (well 2015) were being discussed and not deleted the entire time we had the Herodotus mod who actually did his job.

Now what are the chances he meant what he LITERALLY WROTE?

This thread is perfectly within the rules.
Go shit up the frog poster threads.

Relevant

so what caused that massive uptick in the mid-80s?

...

...

Yes but it's not like the mortgage providers were innocent babes through all this, absentmindedly waddling into a shitstorm.

They knew a tremendous amount of money was to be made regardless, and if they were wise to it, those senators would be promoting their lobbyist's draft of the bill.

Big finance came out of the great recession with meteoric gains. It was the biggest upward transfer of wealth in US history.

The bailout was like being given the biggest bonus of your life for doing the worst job you could ever do.

Incentive structure at the executive level induced top management of the big banks to take on outrageous amounts of risk without having to foot the bill if things went south. And many had amazing severance packages even if they were asked to step down.

At the same time, we've recently (compared to 2007) seen a slight decrease in inequality (because of the stock market crash mainly), an uptick in labor cost as a percent of GDP, and a slight diminishment of finance as a percent of GDP.

That's probably not going to continue. It currently looks a lot like 2006-2007 again in the US economy.

Aftermath of the Volcker recession.

economist.com/blogs/freeexchange/2010/03/volcker_recession

>back when TE was better

What the fuck happened to the magazine? It's on full pro-America/pro-neoliberalism shill mode right now.

I can barely read it anymore.
Well, I guess they did advocate for the Afghanistan and Iraq wars at one time as well.

Cont*

They should just stick to economics. It is turning into a political opinion magazine, and that's ruining its objectivity and quality.

They're spooked by the aftermath of the Great Recession, Russia's resurgence and the ongoing populist revival as embodied by people like Trump.

It's their current editor IMHO.

They started losing some fans when they got drier 2009-2011, and switched to being a political opinion piece in 2013-2014. Now it's on full shill overdrive and I am being driven away by it.

I am one of the comments in the article that you linked by the way. I haven't commented since May because of how bad it has gotten.

price increases reached extremes without any fundamental reason for doing so while fed rates did not

fed rates were a contributing factor but could not be the sole cause because the real world is complex and could not be a pivotal cause since they were much higher in the past without similar effects, changes had to have occurred and the failure of Lehman Brothers and other banks is causally linked to subprime mortgages so it is reasonable to conclude that this was a major contributing factor

spice-indices.com/idpfiles/spice-assets/resources/public/documents/323944_cshomeprice-release-0329.pdf

bis.org/publ/qtrpdf/r_qt1409h.htm

upload.wikimedia.org/wikipedia/commons/thumb/6/6c/Shiller_IE2_Fig_2-1.png/300px-Shiller_IE2_Fig_2-1.png

upload.wikimedia.org/wikipedia/commons/thumb/3/31/Federal_Funds_Rate_1954_thru_2009_effective.svg/640px-Federal_Funds_Rate_1954_thru_2009_effective.svg.png

It's funny yet sad how upfront they are about being pro-globalization/neoliberalism
I read a piece they did on Brexit and it was painted as a catastrophe

>price increases reached extremes without any fundamental reason
Really?
>for doing so while fed rates did not
What? I stated that fed rates being low 2001-2004 fueled the debt bubble.

But the abrupt 4% increase in the fed rate 2004-2006 killed public confidence, raised real mortage rates immensely, and caused the collapse of the housing market.

Housing prices started decreasing in early 2006. This slow decrease and higher rates killed a few overextended banks, and led to the panic of 2008.

There wasn't a great economic reason for the crash of 2008 being as severe as it was. That's my point. The fed worsened it.

I'm okay with them being what they've always been, but their incessant pro-America/pro-neoliberalism articles are just driving me insane.

Every time they can use an adjective on China, its negative. Russia? Negative. Iran? Negative. Syria? Negative. Iraq? Oh wow positive. France? Negative. Germany? Negative. Canada? Positive. Brazil? Negative and now positive. Argentina? Negative and now positive.

It just shows their bias. Instead of reporting the facts and analyzing the trends, they toss their adjectives in and political views in.

It's just becoming sloppy and more biased. At least in the past they had some objectivity on economics. Now the politics is flooding every economics article.

>fed rates were a contributing factor but could not be the sole cause

I did not say they were the sole cause of the collapse, but the precipitating factor that exacerbated the recession.

Socialism and Keynesianism.

aren't they getting more sensationalist?

feudalism & state backed subsistence farming
the 2 greatest markets for growth is the combination of citizenry amongst cannabis & anabolic steroid product[ion]s. who has the deepest infrastructure (space & time)

You stated "Nothing made the bubble "burst" until the Fed raised rates 4% in 2 years. ", yet sub-prime mortgages played an overwhelming role and were causally related to the collapse of Lehman Brothers and the 2008 crash. As I said fed rates were a contributing factor, but it is up to debate whether the debt bubble would have been as severe without the sub-prime mortgage crisis.

>the abrupt 4% increase
I don't want to argue "correlation does not imply causation", instead let's compare the period 2001 to 2008 to other historical periods and house prices.

1: there have been far more abrupt changes in the past

2: rates were still relatively low

3: the rate of increase in house prices was at its greatest in 2005 and early 2006 when rates were at their highest since the dotcom bubble

The very low rates after the dotcom bubble did indeed contribute to the housing bubble and the raising of rates to moderate levels contributed to foreclosures among the most risky mortgages, however normally sensible institutions would realize interest rates wouldn't be low forever and wouldn't overinvest in risky assets, they did not as risk was covered up when sub-prime mortgages were repackaged as CDOs.

That does not mean that rising debt isn't a problem, it is just wrong to entirely dismiss the housing bubble so you can pin the crisis entirely on the debt bubble. If you want some super spooky edgy view of the situation why not claim the housing bubble was just a bump in the road compared to what's to come or something. I don't know.

>forced the banks

Yes, those poor bankers, being forced to make ungodly profits then being taken completely by surprised when the SHTF, which they had nothing to do with...

Simple. Automation.

There has been more progress in AI in the past 3 years than there has been in the past 30 years.

Such developments replace jobs as at an exponential rate.

This results in deflation as jobs are being replaced.

>Republicans and Democrats voted for it.

You can say this about literally every bill since the civil war since it's not like there was ever a time when one party held 100% of the seats. It's a meaningless statement.

>2008 can be blamed on Capitalism.

Crony capitalism maybe, but not free market capitalism.

Free market capitalism will never exist in its truest form without a dictatorship who does not listen to anyone.

As long as their is a democracy businesses who are well do to do will use their capital it to influence politics. There is not way to prevent this without a ditactorship.

That said. Chances are you will not get a dictatorship that is ancap.

So tough shit. You will always get crony capitalism with capitalism.

I think he meant that a majority of each party voted for it, i.e. it was actually bipartisan

QE didn't cause the slowdown, QE prevented a worse recession.

If you look at 2008 in perspective of the US economies long term performance, it comes nowhere near to being as bad as Mao, Communism or Pol Pot.

>MUH NEOLIBERALISM

econlib.org/library/Columns/y2010/Sumnerneoliberalism.html

>QE prevented a worse recession
If we would have simple had a collapse, we wouldn't be dealing with this situation right now. Each "preventative measure" prolongs the suffering.

But
>MUB CORPORATE GREED
>MUH UNSUSTAINABLE GROWTH
>MUH SHOCK THERAPY
>MUH NAOMI KLEIN AND NOAM CHOMSKY

The Federal Reserve has had monetary policy too tight for the current conditions.

That's because neoliberalism is an undoubtedly good thing. The problem is central banks without the will to do their job.

monetary policy is second fiddle to the greater social policy

examples laws on prohibition & market development, military & war (present & future predictors) etc

Still the best system with all of its flaws.

>2016
>Being a liquidations

Keynes BTFO you faggots years ago.
What we need now is more monetary stimulus, the Fed were actually considering a rate hike ffs.
Monetary expansion took us out of the great depression and it can help us again. We don't need to bother with fiscal stimulus, just look at things like infrastructure on a cost-benefit basis.

>Liquidationist*

Tapped out of room to grow.

Other major countries got out of the Great Depression faster than the US and without any heavy-handed keynesian policies.
In fact the two slowest recovering economies were US and Germany, or the two economies with the strongest state imprints.

Can you explain what you mean on laws on prohibition & market development?

These things are all aggregate supply shocks where as monetary policy is used to control aggregate demand. Both are important and I think that post 2008 we have had too low AD but our problems have been compounded with AS shocks too.

The other countries left the gold standard earlier, recovered earlier. Ever since the monetary history of the united states we have known that the largest problem was tight monetary policy. FDR's expansionary spending was cancelled out by the contractionary NIRA.

China for example was on the silver standard and was fine until the US left the gold standard as this caused people to buy up silver ( Also a US politician got the state to buy up lots of silver to appease his mining constituents ). This deflationary shock damaged China's economy.
Japan left the GS early and spent lots of money and escaped relatively unharmed.

Capitalism

I seem to recall them in a recent article characterizing Russia as "nakedly fascist" which struck me by surprise.

>The other countries left the gold standard earlier, recovered earlier
Not really.
Obviously it's not so simple that you can generalize one factor as the reason for recovery, but I don't think there's great argument to be made for ending of the gold standard as that factor.

Okay.

If the fed rate wasn't all that high when the economy was growing 3.5%, then what the hell is it now? 7+ years of essentially ZIRP.

>there have been far more abrupt changes in the past

Only 1980 and1999-2000 were anywhere near as abrupt and heavy as 2004-2006.
Funny enough, both led to recessions.

>not real Capitalism user

Is this an argument?

Care to elaborate what happened since 2008?

Maybe so, but if we hadn't done it in 2009-2011 we would not have got out of the recession.

What. The. Fuck.

No one except a few radicals agrees with what you are saying.
Mind explaining? The dollar was the weakest ever trade weighted 2008-2014.

There is undoubtedly decent evidence that leaving the gold standard and expanding monetary policy reflated the economies and led to a change of market expectations towards a pro-investment bias.
It gave Central Banks more control over the economy and helped them chance expectations.

How much of a change? Minor, but statistically significant. Enough to make the policy useful for alleviating downturns and preventing bubbles.

Monetary policy shouldn't be judged on whether the dollar is low relative to the past, as conditions have changed since the past.
Monetary policy should be judged easy or tight relative to what needs to be done to meet the 2% inflation target.

tradingeconomics.com/united-states/inflation-cpi

It's pretty clear that in 2009 ( and recently ) the Fed failed to meet the 2% inflation target. By this view monetary policy was too tight in 2009. The US actually went into deflation. Central banks can cause inflation without worrying about the zero lower bound ( case in point: Zimbabwe ).

Did you read the link I posted?

An occasional recession doesn't mean capitalism has failed.

>comparing 1980 to 2008

Wow now lets compare 2000 to 2016.

>Monetary policy shouldn't be judged on whether the dollar is low relative to the past, as conditions have changed since the past.
But it provides an extremely apt insight to the relative performance of America's export/import industries.
Therefore your "logic" is meaningless.

>Monetary policy should be judged easy or tight relative to what needs to be done to meet the 2% inflation target.
Why does the inflation target have to be hit? It wasn't hit 2012-present so why hit it now?
Low inflation these last 4 years has led to the biggest real wage gains in 3 decades.

What the US does have is an immense amount of debt and rates so low that investment decisions are getting out of line with fudamentals.
Ex: Apple is selling bonds to fund share buybacks because bond rates are so low that the dividend earned back is higher.

Instead of selling bonds to finance CAPex, companies in the US are using it to pad financial statements for AAA ratings to make their ability to buy debt even easier.

This is why despite .5% interest rates and 1.4% 10 year yields, CAPex is stagnant since 2008.

I read the link and it is an idiotic argument to say the least.

1980-2008 was the BEST example of neoliberalism possible.

1980-2016 would show a far different result. Furthermore, 1960-2016 would show a far different result. The statist Capitalist economies of the world outperformed the liberal economies until the early 70's during the oil shocks.

Finally, The Heritage Foundation's "economic freedom" index is bullshit. Sumner has a chart where the "freer" countries are richer, and he claims this richness is because of neoliberalism and "freedom".
Well the truth is that almost all the richer countries he listed were richer in 1970. 1960. And 1950.

Chicken or the egg?

Finally, explainAnd no it is not monetary policy not doing its job. Inflation was ABOVE TARGET 2010-2012. Just as it is below 2013-present.

youtu.be/4ObqeS5o7Ag

>What happened to the world economy

"I FOUND A FLAW" - Alan Greenspan

>“You had the authority to prevent irresponsible lending practices that led to the subprime mortgage crisis. You were advised to do so by many others,” said Representative Henry A. Waxman of California, chairman of the committee. “Do you feel that your ideology pushed you to make decisions that you wish you had not made?”

>Mr. Greenspan conceded: “Yes, I’ve found a flaw.

>“This modern risk-management paradigm held sway for decades,” he said. “The whole intellectual edifice, however, collapsed in the summer of last year.”

nytimes.com/2008/10/24/business/economy/24panel.html?_r=0

GREENSPAN: OOPS I FUCKED THE WORLD ECONOMY WITH THE INTEREST RATES

IF YOU DON'T STOP FUCKING WITH THE INTEREST RATES BECAUSE RICH INVESTORS DEMAND IT YOU ARE GOING TO FUCK THE WORLD ECONOMY AGAIN AND AGAIN AGAIN...

>two democrat senators forcing a bill that forced the banks to grant morgages to shit clients
Sure.

>central banks
>private business
>controlling world economy
>fucking with shit all the time to make rich investors lives easier

YEAH THAT'S WORKING GREAT WHEN THE FUCK DO WE STOP THIS BULLSHIT?

END 1913 NOW

DIE FEDERAL RESERVE

DIE IN A FIRE

>that wasn't real [insert ideology here]
Every time, without fail.

>no silly bankers, you NEED to give mortgages to poor and stupid people who won't pay you back
>WHAT DO YOU MEAN THE BANKS ARE COLLAPSING ???

"You're right, we did it. We're very sorry. But thanks to you, we won't do it again."

t. Bernanke

...

2008 crisis wasn't even that bad. Gotta love at how the commie/occupy memers were all like THIS IS IT, THE END OF CAPITALISM, I laughed my shit off

The banks literally lobbied for the bill, and in no way did it force them to do that.

Freddie mae and Fannie did 90% of that.

>2008 crisis wasn't even that bad.

It wasn't, it probably isn't even in the top 5 of the last 100 years. Two year recession we already recovered from, oh wow it's fucking nothing. Communist countries literally had famines killing dozens of millions of people yet the greatest "crises of capitalism" only cause unemployment fir a few years.

>inb4 Peter Schitt / Ron Paul doomsday faggotry

>it's not that bad as long as it's better than GLF and Holomodor and Cambodian JUSTism.