abu yahya's definitions
*noun*; global economic collapse; in the USA, this began in 1929 and persisted to 1939; most other industrialized countries emerged from the Depression earlier.
During the Great Depression, unemployment reached over 25% in the USA, and those who had jobs suffered severe wage cuts. The index of industrial output fell over 53% from its high in July '29, while trade and capital markets plummeted to mere fractions of their former levels.
*What Happened*
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Many people imagine that the Stock Market Crash (Oct '29) and the Great Depression are the same thing. However, it took another three years for employment, bank failures, and declining industrial output to run its course.
In 1929 the USA had 25,000 banks. By 1933, 10,000 had either failed or been merged with another to avoid failure. At this time there was no FDIC, so depositors mostly lost their money.
Another phenomenon was plunging prices: the consumer price index fell 25% during the first four years. For businesses, this was a disaster, and forced them to lay off millions.
The Great Depression made farms in much of the Southwest unviable; ruined farmers fled to California or Washington, and their abandoned farms succumbed to the Dust Bowl. This was the single largest ecological disaster in recorded history.
*How It Happened*
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There are basically three main explanations for the Great Depression.
1. During the 1920's, there was a huge and growing disparity between rich and poor. The incomes of the great majority rose much more slowly than productivity, but this was masked by increased borrowing. People were able to borrow because the market value of their assets was larger than what they owed; but when a rash of defaults occurred, then the market value of assets plummeted, and people owed more than their assets were worth. Businesses had to lay off workers, which further reduced aggregate demand.
2. The Great Depression began as another minor downturn, but was made much worse by the failure of the Federal Reserve to respond adequately (see Milton Friedman & Anna Schwartz). While the Fed reduced interest rates, prices fell even faster, so real interest rates soared. This made a quick recovery impossible.
3. The financial markets (combined with Fed supervision) distributed capital badly; for example, speculative ventures in growing wheat in the Great American Desert, real estate in Florida, and so on. When this arrangement of productive resources failed, it constituted an extremely large technology shock. Subsequent policy intervention tended to withhold capital and labor from the most productive enterprises, making the depression deeper.
(Explanation 3 is the New Classical economics explanation; see Harold Cole & Lee Ohanian.)
*Roosevelt Administration*
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Franklin D. Roosevelt was elected by a landslide in 1932, and inaugurated 4 March 1933. The White House immediately used emergency powers to close, restructure, and re-open the nation's banks. During the first 100 days of the FDR administration, Congress passed the New Deal which greatly eased the impact of the Depression on the hardest hit.
The New Deal did not significantly hasten the end of the Great Depression, because it was too small to provide a meaningful fiscal stimulus. However, it did introduce many important programs to help those affected by poverty. The Depression had ended in most of the world by 1937; the US was mostly recovered by 1939, when World War 2 broke out.
During the Great Depression, unemployment reached over 25% in the USA, and those who had jobs suffered severe wage cuts. The index of industrial output fell over 53% from its high in July '29, while trade and capital markets plummeted to mere fractions of their former levels.
*What Happened*
_____________________________________
Many people imagine that the Stock Market Crash (Oct '29) and the Great Depression are the same thing. However, it took another three years for employment, bank failures, and declining industrial output to run its course.
In 1929 the USA had 25,000 banks. By 1933, 10,000 had either failed or been merged with another to avoid failure. At this time there was no FDIC, so depositors mostly lost their money.
Another phenomenon was plunging prices: the consumer price index fell 25% during the first four years. For businesses, this was a disaster, and forced them to lay off millions.
The Great Depression made farms in much of the Southwest unviable; ruined farmers fled to California or Washington, and their abandoned farms succumbed to the Dust Bowl. This was the single largest ecological disaster in recorded history.
*How It Happened*
_____________________________________
There are basically three main explanations for the Great Depression.
1. During the 1920's, there was a huge and growing disparity between rich and poor. The incomes of the great majority rose much more slowly than productivity, but this was masked by increased borrowing. People were able to borrow because the market value of their assets was larger than what they owed; but when a rash of defaults occurred, then the market value of assets plummeted, and people owed more than their assets were worth. Businesses had to lay off workers, which further reduced aggregate demand.
2. The Great Depression began as another minor downturn, but was made much worse by the failure of the Federal Reserve to respond adequately (see Milton Friedman & Anna Schwartz). While the Fed reduced interest rates, prices fell even faster, so real interest rates soared. This made a quick recovery impossible.
3. The financial markets (combined with Fed supervision) distributed capital badly; for example, speculative ventures in growing wheat in the Great American Desert, real estate in Florida, and so on. When this arrangement of productive resources failed, it constituted an extremely large technology shock. Subsequent policy intervention tended to withhold capital and labor from the most productive enterprises, making the depression deeper.
(Explanation 3 is the New Classical economics explanation; see Harold Cole & Lee Ohanian.)
*Roosevelt Administration*
_____________________________________
Franklin D. Roosevelt was elected by a landslide in 1932, and inaugurated 4 March 1933. The White House immediately used emergency powers to close, restructure, and re-open the nation's banks. During the first 100 days of the FDR administration, Congress passed the New Deal which greatly eased the impact of the Depression on the hardest hit.
The New Deal did not significantly hasten the end of the Great Depression, because it was too small to provide a meaningful fiscal stimulus. However, it did introduce many important programs to help those affected by poverty. The Depression had ended in most of the world by 1937; the US was mostly recovered by 1939, when World War 2 broke out.
The NBER business cycle chronology dates the start of the Great Depression in August 1929. For this reason many have said that the Depression started on Main Street and not Wall Street. Be that as it may, the stock market plummeted in October of 1929. The bursting of the speculative bubble had been achieved and the economy was now headed in an ominous direction.
Randall Parker, "An Overview of the Great Depression" (2002)
Randall Parker, "An Overview of the Great Depression" (2002)
by Abu Yahya March 6, 2009
Get the Great Depression mug.*noun*; in Keynesian economics, the rate at which aggregate consumption rises in response to a rise in national income.
For example, suppose the marginal propensity to consume (MPC) is 0.95. If the national income is 100 billion dollars, and it rises 10%, then consumption will rise by 9.5 billion, and saving will rise by 0.5 billion.
If this theory is correct, then an expanding economy will suffer insufficient demand for its own output, and a recession will be inevitable.
This is why national governments respond to recessions with deficit spending: they are trying to counteract the MPC's effect on aggregate demand, and bring it in line with potential output.
For example, suppose the marginal propensity to consume (MPC) is 0.95. If the national income is 100 billion dollars, and it rises 10%, then consumption will rise by 9.5 billion, and saving will rise by 0.5 billion.
If this theory is correct, then an expanding economy will suffer insufficient demand for its own output, and a recession will be inevitable.
This is why national governments respond to recessions with deficit spending: they are trying to counteract the MPC's effect on aggregate demand, and bring it in line with potential output.
Not only is the marginal propensity to consume weaker in a wealthy community, but, owing to its accumulation of capital being already larger, the opportunities for further investment are less attractive...
J.M. Keynes, *The General Theory of Employment, Interest, and Money* (1936), Ch.3
J.M. Keynes, *The General Theory of Employment, Interest, and Money* (1936), Ch.3
by Abu Yahya March 3, 2009
Get the marginal propensity to consume mug.(ECONOMICS) Total unemployed, as a percent of the civilian labor force (official unemployment rate). Does not include discouraged workers. Also referred to as "headline unemployment" because it is the statistic reported in the news.
The US Bureau of Labor Statistics regularly publishes six estimates of unemployment. The others are U-1, U-3, U-4, U-5, and U-6. Eurostat publishes one monthly estimate of unemployment for the European Union, which is approximately midway between U-3 and U-4.
The unemployment statistics for the USA are collected through a monthly Current Population Survey (CPS) (also known as the household survey) and an establishment survey.
The US Bureau of Labor Statistics regularly publishes six estimates of unemployment. The others are U-1, U-3, U-4, U-5, and U-6. Eurostat publishes one monthly estimate of unemployment for the European Union, which is approximately midway between U-3 and U-4.
The unemployment statistics for the USA are collected through a monthly Current Population Survey (CPS) (also known as the household survey) and an establishment survey.
U-3 is the official unemployment rate in the USA; it excludes passive jobseekers (people who are just looking for available job openings without applying). Passive jobseekers are counted as part of the labor force in Europe, but not in the USA. Prior to the 2008 economic crisis, this caused unemployment rates in the USA to be about 1% lower than they would have been if the BLS had used European methods of estimating.
by Abu Yahya July 17, 2010
Get the U-3 mug.Philippine slang for someone who thinks compulsively erotic thoughts; dirty minded; the tendency to give innocent phrases a sexual connotation.
Occasionally the use of the term "green minded" by Usonian English speakers (to mean "environmentally conscious") causes Pinoys great amusement.
Occasionally the use of the term "green minded" by Usonian English speakers (to mean "environmentally conscious") causes Pinoys great amusement.
WILLIAM: How long have you lived here?
ALFREDO: Ever since I came in the USA
WILLIAM: Dude, you had sex with the USA? Did she get pregnant?
ALFREDO: Aw, man, you have a green mind!
ALFREDO: Ever since I came in the USA
WILLIAM: Dude, you had sex with the USA? Did she get pregnant?
ALFREDO: Aw, man, you have a green mind!
by Abu Yahya February 22, 2010
Get the green mind mug.(FINANCE) an amount of precious metals, silver, cash, or other thing of value that a bank keeps in storage to meet unexpected liabilities.
Banks generally accept deposits and lend out money. The deference between the rate of interest paid out to deposits, and the rate of interest required for loans, is called "the spread"; it is the bank's source of income.
Banks are not allowed to lend out 100% of the money they receive as deposits; if they did, then depositors would be unable to take money out of the bank. On the other hand, the bank has to lend most of the money out, since it needs the income earned from interest on loans. Throughout the history of the Usonian banking system, the US states or the federal government have had rules about interest rates, reserves, and financial accounting used by banks.
Since Aldrich-Vreeland Act (1908), banks have been allowed to hold deposits with the US Treasury, then (after 1913) with the Federal Reserve System. Deposits in the FRS do not earn interest, but the reserve banks permit member banks to borrow if they fall short of the reserve requirements (see federal funds rate)
Banks generally accept deposits and lend out money. The deference between the rate of interest paid out to deposits, and the rate of interest required for loans, is called "the spread"; it is the bank's source of income.
Banks are not allowed to lend out 100% of the money they receive as deposits; if they did, then depositors would be unable to take money out of the bank. On the other hand, the bank has to lend most of the money out, since it needs the income earned from interest on loans. Throughout the history of the Usonian banking system, the US states or the federal government have had rules about interest rates, reserves, and financial accounting used by banks.
Since Aldrich-Vreeland Act (1908), banks have been allowed to hold deposits with the US Treasury, then (after 1913) with the Federal Reserve System. Deposits in the FRS do not earn interest, but the reserve banks permit member banks to borrow if they fall short of the reserve requirements (see federal funds rate)
Bank reserves serve two purposes: they allow banks to pay depositors on demand, and they play a role in monetary policy.
by Abu Yahya September 4, 2010
Get the bank reserves mug.(FINANCE) borrowing securities for immediate sale, in anticipation of a sharp decline. Short selling requires strong nerves and excellent market timing; it also requires the ability to locate tranches of securities to borrow. If the short seller is correct, then she can buy back the securities at a much lower price, and lock in very high profits with very little initial investment.
Closely related to the concept of a short position. However, a short position includes buying put options (for example), while a long position could include short selling put options. So they are not exactly the same.
If a short sellers are wrong about the market, they are left hastily covering shorts, or buying the item they borrowed at a HIGHER price than they sold it for.
Closely related to the concept of a short position. However, a short position includes buying put options (for example), while a long position could include short selling put options. So they are not exactly the same.
If a short sellers are wrong about the market, they are left hastily covering shorts, or buying the item they borrowed at a HIGHER price than they sold it for.
Jim Fisk was a master of the short squeeze; he appeared to cooperate with short selling until he was able to call in loans, forcing his counterparties to cover their shorts.
by Abu Yahya September 2, 2010
Get the short selling mug.*noun*; a subdivision of economics that focuses on addressing recessions by stimulating supply, rather than demand. During a recession, supply siders recommend cutting taxes rather than increasing government spending.
"Supply side" is in contrast to traditional practitioners of Keynesianism, "demand siders" who believe the main fiscal policy tool for recessions should be increased government spending.
Both supply siders and demand siders believe the government is responsible for formulating effective fiscal policy during recessions.
The most famous advocate of supply side economics was Arthur Laffer.
"Supply side" is in contrast to traditional practitioners of Keynesianism, "demand siders" who believe the main fiscal policy tool for recessions should be increased government spending.
Both supply siders and demand siders believe the government is responsible for formulating effective fiscal policy during recessions.
The most famous advocate of supply side economics was Arthur Laffer.
When Ronald Reagan ...promised to cut taxes ...he claimed tax revenue would go up, not down... as the economy boomed in response to lower rates. Since then, supply side economics ... has become a central tenet of Republican political and economic thinking in the country.
"McCain sticks to Supply Side Economics..." *International Herald Tribune* (24 March 2008)
"McCain sticks to Supply Side Economics..." *International Herald Tribune* (24 March 2008)
by Abu Yahya March 5, 2009
Get the Supply Side Economics mug.