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Questions And Answers
The stock market crash of 1929 touched off a chain of events that plunged the United States into its longest, deepest economic crisis of its history. It is far too simplistic to view the stock market crash as the single cause of the Great Depression. A healthy economy can recover from such a contraction. Watch ABC’s historical documentary The Great Depression 1929 – 1939
The global economy is dominated by a concept called fractional reserve banking, The concept is not undisputed because it has been one of the key contributing factors to every crisis since the Wall Street Crash of 1929.
Fractional reserve banking is a system in which only a fraction of bank deposits are backed by actual cash on hand and available for withdrawal. This is done to theoretically expand the economy by freeing capital for lending. To explain the concept we added some illuminating animations
The former commerce minister Chen Deming warned that China should not assume it will overtake the United States to become the world’s top superpower. The perception that China is the No 2 global power and on the path to become No 1 is based on two questionable assumptions – that China’s stellar growth levels, which outpace those of its main competitors, will continue on the same path, and that gross domestic product or the size of the economy equates to national power.
Despite Deming’s toned down perspective, the US feels the competition and is stepping up the stakes with a trade war. In Trump’s Trade War we witness the inside story of President Trump’s gamble to confront China over trade. But anyway, China is booming and challenging the US in many ways as the informative documentary New Money shows.
When money drives almost all activity on the planet, it’s essential that we understand it. Yet simple questions often get overlooked, questions like; where does money come from? Who creates it? Who decides how it gets used? And what does this mean for the millions of ordinary people who suffer when the monetary, and financial system, breaks down? Watch the superb informative documentary Money for Nothing: Inside the Federal Reserve. Another good film on the subject is 97% Owned, How Money is Created.
Consumerism is a social and economic force designed to encourages the acquisition of goods and services in ever-increasing amounts… Watch ‘Surplus Terrorized Into Being Consumers’.
Leading up to 2008 banks demanded more subprime mortgages to support the profitable, but highly disputable, sale of derivates. The HBO documentary “Panic: The Untold Story of the 2008 Financial Crisis.” “provides a unique behind the scenes look inside the most successful—and most loathed—taxpayer-funded bailout in history.”
Another superb documentary “When Bubble Burst” examines the mechanics behind financial bubbles and crashes and suggesting trends for the future.
Some praise globalization while others protest the phenomenon and blame it for job loss and other ills. Is one side correct or is globalization more of a mixed bag? Let’s take a look at some of the pros and cons of globalization.
Corporations are the most important organizations in the modern economy – they house, feed, clothe, and employ us. Like the Church, the Monarchy and the Communist Party in other times and places, the corporation is today’s dominant institution. So what does it do? How does a corporation operate. Watch The Corporation
the great mystery
World Debt vs GDP
the world owes three times as much as it owns. who is this money owed to?
In 2018 global debt hits a new record at $247 trillion. Of that figure, the non-financial sector accounted for $186 trillion.
As per World Bank estimates, the nominal world GDP in 2018 was $84 trillion.
Three documentaries that explain it all
Highly acclaimed, musical documentary that looks at the arguments for capitalism and technology, such as greater efficiency, more time and less work.
Superb informative documentary that looks at the severe issues within our global economy from the perspective of the 2008 crisis.
The first film ever to take viewers inside the world’s most powerful financial institution, the American Federal Reserve.
timeline
of economics
defining events
300 - 600 AD
Migration and Barbaric Wars
After the desintegration of the Roman Empire, widespread invasion of people within and into Europe, including the violent Huns, Europe entered a dark period, characterized by famine, disease and barbaric wars. the invasion of the huns The aggravated economic hardship saw many laborers give up their land and freedom to work under the protection of the influential local lords.
As such, the peasants were guaranteed protection and access to land in which they could provide economic service to their master. This was a form of barter trade: security for economic service. This system gave in to the structure of feudalism in which kings would give local lords gifts of land in exchange for loyalty and maintenance of local civil order.
1346 - 1349
The Black Death
The BLACK PLAGUE was one of the most devastating pandemics in human history. It is estimated that the disease swept away 60% of the European population. The unfathomable death toll had a profound effect on the coarse of human history and Europe’s place in it. The catastrophy unchained the continent from its religious and feudal chains, thereby releasing from within the power of entrepreneurship, and a desire for rational explanations and discovery. As a result Europe grew a large and powerful middle class which propelled the continent into a world dominating position until WWI
1439 - 1440
Invention of the Print Press
The printing press had great effects on the economy. Identical to the onslaught of the internet, the printing press facilitated increased demands and led to the flourishment of trade throughout Europe. Also, it created the printing industry and facilitated the spread of ideas, knowledge, and inventions.
1492
America Discovered
Christopher Columbus discovers America, flooding Europe with precious metals.
1500 - 1750
Starting in the 15th century and inspired by the discovery of alternative trading routes that by-passed the hostile Middle East, European long-distance trading activities increased in volume and density over a long period. Consequently, the capital demands of these activities also grew. The expansion of the European powers into other parts of the world, the demand of the emerging states for credit, and the emergence of new forms of production were central factors in the formation of Trading companies. A trading company was the forerunner of a joint-venture or enterprise, essentially a partnership formed between organizations or people to engage in long-distance trading activities and larger financial transactions to eventually share the profit. Trading companies reflected the growing demand for capital and manpower, and were to an extent, the foundation upon which capitalism and the current economic world order were formed.
1760 - 1840
Industrial Revolution
Thanks to the introduction of new techniques in textiles, iron making and other industries, goods that had once been painstakingly crafted by hand started to be produced in mass quantities by machines in factories. Fueled by the game-changing use of steam power and coal, products and goods were transported all over the world in unprecedent amounts, booming the world economy. To support this growth people moved away from their farms in rural areas to the cities to work in the factories and mines. The urbanized world as we know it today had emerged. Although inequality was brutaly high, growth was unprecedented
1792 - current
Stock Exchange
Banks and industrial financiers rose to new prominent during the period, as well as a factory system dependent on owners and managers. A stock exchange was established in London in the 1770s; the New York Stock Exchange was founded in the early 1790s.
1821 - 1971
Gold Standard
With international trade booming , most countries saw the need to standardize their currency.
19th century
Expansion of democracy and market capitalism
Despite severe social inequalities in the 19th century, the global economy was growing robustly. Technology, like steamships, the telegraph, and the telephone, expanded worldwide travel and communication. There were no limits on immigration and no need for passports. Governments were small and kept their budgets balanced. People were migrating all over the world, and Europe and the US were quickly urbanizing.
1914 - 1918
World War I
In 1918 the war itself was over, but the implications were not. Countries imposed restrictions on trade, capital flow, and immigration. People became suspicious of foreigners, causing protectionism. Russia installed communism, which alienated the largest country in the world from the flow of free-market capitalism. Germany, France, and England had lost 80% of its male (working) population between 18 and 46. Countries suspended the gold standard to pay for the war but suffered from hyperinflation. These circumstances set the stage for the Great Depression.
29 october, 1929
Black Tuesday
During the “Roaring Twenties”, the U.S. economy and the stock market experienced rapid expansion, and stocks hit record highs, year after year. It was a time of irrational exuberance. Therefore many ordinary working-class citizens had became interested in stock investments, and many purchased stocks “on margin,” meaning they paid only a small percentage of the value and borrowed the rest from a bank or broker. This together with an argrigultural crisis, cheap loans, let to a bubble that exploded on tuesday morning, 29 october.
1929 - 1939
The Great Depression
THE GREAT DEPRESSION was the worst economic downturn in the history of the industrialized world, lasting from the stock market crash of 1929 to 1939. It began as an American crisis, specifically a huge stock market crash, but had knock-on effects around the world. The Great Depression was severely felt in Germany, where it caused widespread unemployment, starvation and misery. These conditions were instrumental in the rise to power of Adolf Hitler.
1929 - 1939
World War II
We have chosen the Japanese attack on Pearl Harbor to represent World War II because, from a world-economy perspective, this was one of the most decisive moments of the 20th century. In previous decades, the US had grown into a global power. Still, entangled in the turmoil of the Great Depression (watch), it avoided having to assert this power in international politics, economy, and military conflicts. Especially during the 1920s and 30s, American public opinion and policy were very isolationistic. That entirely changed with the attack on Pearl Harbor (Watch Roosevelt’s Declaration of War Speech) Speech. In close collaboration with its allies, the US took charge of the global conflict and vowed to defend freedom and peace all over the world. After December 7, 1941, the center of world-power had decisively shifted from Europe to the US and has remained there ever since.
1948
Marshall Plan
The Marshall Plan (Watch) (officially the European Recovery Program, ERP) was an American initiative passed in 1948 to aid Western Europe, in which the United States gave over $12 billion (nearly $100 billion in 2018 US dollars) in economic assistance to help rebuild Western European economies after the end of World War II.
1945 - 1960
Automobile Industry
As the Cold War unfolded in the decade and a half after World War II, the United States experienced phenomenal economic growth. The war brought the return of prosperity, and in the postwar period the United States consolidated its position as the world’s richest country. The growth had different sources. The automobile industry was partially responsible, as the number of automobiles produced annually quadrupled between 1946 and 1955. A housing boom, stimulated in part by easily affordable mortgages for returning servicemen, fueled the expansion. The rise in defense spending as the Cold War escalated also played a part. More about Post War Economy 1945 -1960…
1971
Gold Standard is Abandoned
Earlier in 1933, the US abandoned the gold standard to help combat the Great Depression. However, The U.S. continued to allow foreign governments to exchange dollars for gold until 1971, when President Richard Nixon abruptly ended the practice to stop dollar-flush foreigners from sapping U.S. gold reserves. Watch (37th) President Nixon’s address to abandon the Gold Standard.
1973
Opec Oil Embargo
On October 19, 1973, the 12 OPEC members agreed to to stop exporting oil to the United States, in response to Nixon’s decision to take the dollar of the Gold Standard. Over the next six months, oil prices quadrupled. The oil embargo is widely blamed for causing the 1973-1975 recession. But U.S. government policies really caused the recession and the stagflation that accompanied it.
1991
Internet and the World Wide Web
Reaganomics is a popular term referring to the economic policies of Ronald Reagan. These economic policies were introduced in response to a prolonged period of economic stagflation that began under President Gerald Ford in 1976. Reaganomics ushered in one of the longest and strongest periods of prosperity in American history. Between 1982 and 2000, the Dow Jones Industrial Average grew nearly 14-fold, and the economy added 40 million new jobs.
2001
Internet Bubble
During the late 20th century, the Internet created a euphoric attitude toward business and inspired many hopes for the future of online commerce. For this reason, many Internet companies (known as “dot-coms”) were launched, and investors assumed that a company that operated online was going to be worth millions.
But, obviously, many dot-coms were not rip-roaring successes, and most that were successful were highly overvalued. As a result, many of these companies crashed, leaving investors with significant losses. Consequently, the market crash cost investors a whopping $5 trillion.
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2008
2008 Financial Crisis
The financial crisis was primarily caused by deregulation in the financial industry. That permitted banks to engage in hedge fund trading with derivatives. Banks then demanded more mortgages to support the profitable sale of these derivatives. They created interest-only loans that became affordable to subprime borrowers. Watch WHEN BUBBLES BURST to understand the full story
today
Today’s economy is doing well. it’s neither too hot nor too cold.
The threat of disruptive trade disputes (TRUMP’S TRADE WAR) has eased in recent weeks, with word that the White House and China have agreed to ease tariffs.
Still, in a survey released in December by the Blue Chip Economic Indicators newsletter, member economists ranked trade disputes with China as easily the most worrisome peril, ahead of weaker corporate profits, a general global slowdown and other threats.
“Global geopolitical conflicts or even a natural disaster such as a Middle East earthquake could raise the price of energy and trigger recession,” McPheters said. “There are no signs of spiking oil prices, but external shocks are always a risk.”
ruling ideas
400 -1500
Market Economy and Feudalism
Power in the Middle Ages was based on owning land, because land was capital. It meant food and thus life. Jobs in the Middle Ages consisted of anything related to working the land – peasants, utility workers (guilds) and Military (Knights and mercenary soldiers) who protected the peasants and guild workers so they could produce food for the community.
As a result, the most logical economic system during the middle ages was that of the feudalism. The basic element of the feudal system was the manor which was a self-efficient estate controlled by the lord. The lord enjoyed the land rights – often from a higher lord or even the king – and the right to control the peasants through serfdom. In return the lord protected the peasents provided that they payed him with obedience and a surplus of the land’s produce.
1360 - 1700
The Renaissance
Due to the perpetual bloodshed of the 100 years war, widespread uncertainty, catastrophic pandemics, global exploration, and invention, the worldview of Europeans changed from God-oriented to man-oriented. This had a profound impact on cultural and economic life in Europe. Instead of looking inward, following the will of God, people started to take control of their own destiny, defy rigid ideas and explore unknown worlds. Within a hundred years, Europe became the most dynamic continent in the world, with a booming globalizing economy.
1715 - 1789
The Enlightenment
In continuation of the Renaissance’s shift in focus from God to man, from Heaven to life on earth, the Enlightenment is one of the most revolutionary periods in world history as it transformed the way in which societies viewed the relationship between the ruler and the ruled. The ideas of the enlightenment originated in Britain and swept across the ‘western’ world kick-starting the French and American Revolution, abolishing slavery and promoting the idea of free world trade. However the ideas of the enlightenment were in stark contrast with the social effects of the industrial revolution which permeated the world with a tremendous social imbalance. The often horrific living conditions in cities and mining areas were debit to World Wars later on. Dying on an open battle field wasn’t such a bad option compared to withering away in some city gutter or suffocating 800 meters deep in a mine.
1858 - 1988
Marxism
The 19th century was a time of great economic and technological prosperity. However, only the rich and powerful benefitted. For common people, instead, it was a time of great anxiety and uncertainty brought about by globalization and urbanization. Karl Marx saw capitalsm as a continuation of the old feudal system. The means of production (capital, land, machinery) is owned by a lucky few. The working on the other hand, does not have access to the means of production. As such, they are forced to sell their labor, vulnerable to be exploited.
1914 - 1988
Communism vs Capitalism
Although working classes all over the world were susceptible to the ideas of Marx, it was nowhere stronger than in Russia where famine and war had brought the population on the verge of starvation while its (Tsar) Monarchy was living in wealth. Communism, as opposed to capitalism, believes that a society should be classless, that the community should own all property and that each person should contribute and receive according to their ability and needs. Capitalism, on the other hand, believes that a class society inspires individuals to excel and innovate, thereby improving not only one’s own but also society’s living standard. Characteristics central to capitalism include private property, capital accumulation, wage labor, and competitive markets.
1918 - 1929
Laissez-faire of the 'Roaring Twenties'
The 1920s were characterized by dynamic economic and socio-cultural growth around the world. The world was recovering from the devastating consequences of World War I, and the population was spending more on consumer goods and boosting economic growth. It was a time of rebuilding, trying to enjoy life in a frantic effort to forget the horrors of the past.
The United States, which suffered significantly less than major European countries during World War I, became the largest economy in the world. In accordance with the sign of the time, Americans consistently voted for conservative republican Presidents that were all typically in favor of free market and bussiness This attitude towards business was typified by Calvin Coolidge’s statement that “the man who builds a factory builds a temple.” This sort of attitude on the part of the Republican presidents created a situation in which businesses were relatively free to operate as they pleased.
1929 - 1939
World War 2 Before the War
Unemployment
The Rise of Fascism in Europe 1920 - 37
The years leading up to the declaration of war between the Axis and Allied powers in 1939 were tumultuous times for people across the globe. The Great Depression had started a decade before, leaving much of the world unemployed and desperate. Nationalism was sweeping through Germany, and it chafed against the punitive measures of the Versailles Treaty that had ended World War I. China and the Empire of Japan had been at war since Japanese troops invaded Manchuria in 1931. Germany, Italy, and Japan were testing the newly founded League of Nations with multiple invasions and occupations of nearby countries, and felt emboldened when they encountered no meaningful consequences. The Spanish Civil War broke out in 1936, becoming a rehearsal of sorts for the upcoming World War — Germany and Italy supported the nationalist rebels led by General Francisco Franco, and some 40,000 foreign nationals traveled to Spain to fight in what they saw as the larger war against fascism. In the last few pre-war years, Nazi Germany blazed the path to conflict — rearming, signing a non-aggression treaty with the USSR, annexing Austria, and invading Czechoslovakia. Meanwhile, the United States passed several Neutrality Acts, trying to avoid foreign entanglements as it reeled from the Depression and the Dust Bowl years. Below is a glimpse of just some of these events leading up to World War II.
1981 - 1989
Reaganomics
Reaganomics is a popular term referring to the economic policies of Ronald Reagan. These economic policies were introduced in response to a prolonged period of economic stagflation that began under President Gerald Ford in 1976. Reaganomics ushered in one of the longest and strongest periods of prosperity in American history. Between 1982 and 2000, the Dow Jones Industrial Average grew nearly 14-fold, and the economy added 40 million new job
1981 - today
The Information Age
The Information Age is now but began with the release of the first Personal Computers (Apple II, IBM’s PC, Macintosh) in the late 1970s. The era was characterized by the rapid shift from traditional industry that the Industrial Revolution brought through industrialization, to an economy primarily based upon information technology. In the information age, the world shifted into high gear, both socially and economically – life went faster, and markets became bigger. And as if the world wasn’t going fast enough, in 1991 the World Wide Web came along, soon followed in 1994, by the launch of the first commercial mobile networks. Within fifteen years, nearly everyone on the planet was running around with a mobile phone, calling whoever, whenever. People started working from their homes, and whatever information they needed was just a click of a button away. As a result of advances in communication technology, the world had become smaller, people had been made much more knowledgable (in potential), and the possibilities to conduct business had exponentially multiplied.
The era boosted entrepreneurship, the STARTUP.COM mindset – anyone with a laptop, a mobile phone, and a great idea could get rich fast if met with the right people. And the right people, at the time, we very eager to hop on board with anything that carried Dot.com in its name. Like the period prior to the great depression the first 20 years of the Information age was a time of irrational exhuberance. In the banking world wizkids were given free hand to develop finance products, using the increased calculating power of computers and the internet, that no one fully understood. Inevitably the era ran into its first crisis 2001, with the burst of the internet bubble. Than, seven years later after an intensified period of further deregulation (to compensate for the 2001 loses) followed the 2008 financial criss.
1981 - today
Deregulation
The 2008 financial crisis was caused by the widespread practice of banks engaging in hedge fund trading with derivatives. As a result, banks then demanded more mortgages to support the profitable sale of these derivatives. They created interest-only loans that became affordable to subprime borrowers. The practice shows much resemblance to a pyramid scheme, which, at the time, outraged the public.
The real cause of the 2008 crisis, however, was the fact that we, our governments and central banks, had permitted a fully globalized information economy to run loose totally unregulated. Watch History of Revolutions and Financial Crises.
