The Second Brief History of the United States

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The Second Brief History of the United States
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Things to remember from last time

• 2nd Industrial Revolution launches US to 1 GDP
• Prosperity in 1920s 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

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Herbert Hoover lengthened the Depression

• Herbert Hoover enacted higher taxes to boost the
  governments 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

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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

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Depression Data
Table 2 Depression Data33 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
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WWII

• The main reason for the United States economy
  flourishing through the 1940s 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

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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

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Great Society

• 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

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Inflation in the 1970s

• Under Presidents Nixon and Ford in the 1970s 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

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OPEC

• Organization of Petroleum Exporting Countries
• Founded in the late 60s
• 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!)

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Reaganomics

• In the early 1980s 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

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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

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The 90s

• Clinton carried over some of other Democratic
  Presidents ideas about economy, but largely let
  the economy loose
• Like Reagan
• In addition to some sweet music and hairstyles,
  the 90s 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

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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 -gt
  crash

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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

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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

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The 2008 Housing Market Crash

• Well get to this next week