The Economic Crisis in Retrospect

The Economic Crisis in Retrospect

Explanations by Great Economists

Edited by G. Page West III and Robert M. Whaples

As the United States continues its slow recovery from the global financial crisis of 2008, politicians, policymakers and academics are increasingly turning to the lessons of history to gain insight into how we might address both current and future economic challenges. This volume offers contributions by eminent economists and historians, each commenting on the theories of a particular 20th century economist and the ways in which those theories apply to modern economic thought.

Chapter 1: Insights for today’s trying economic times

Robert M. Whaples and G. Page West III

Subjects: economics and finance, economic psychology, history of economic thought, international economics, political economy

Extract

These are surely trying economic times. True, modern economies have continued to push back the boundaries of scarcity. Real incomes in virtually every country of the world have risen strongly over the past decades – giving us standards of living that our grandparents, great-grandparents and more distant ancestors could only dream about (Maddison, 2001). But, the domestic and international economies have been rattled by recent events. In the wake of the 2008 financial crisis, the median net worth of American households fell from $126,400 (2007) to $77,300 (2010) – wiping out nearly two decades of growth (Bricker et al., 2012). For the first time since the Great Depression, the US unemployment rate stubbornly remained above 8 percent for over four years. In August 2011, Standard and Poor’s downgraded the credit rating of the federal government from AAA to AA+ – and the fiscal condition of the US government looks increasingly cloudy due to projections of high budget deficits and climbing debt into the foreseeable future.

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