Changes

Global governments spent an astonishing $17 trillion to support the world economy in the form of bailouts, guarantees, and equity market purchases. That $17 trillion represents one quarter of global GDP, but only a fraction of that sum will actually be paid out.<ref>One analyst in 2011 put the figure at $29 trillion. [http://www.levyinstitute.org/pubs/wp_698.pdf $29,000,000,000,000: A Detailed Look at the Fed’s Bailout by Funding Facility and Recipient], James Felkerson, University of Missouri–Kansas City, December 2011.</ref>  Global investment declined by 15% , and global GDP by shrank by nearly $4 trillion, or an amazing 6%.  Global industrial production in the advanced economies dropped a 15%, causing unemployment  to soar around the world, nearly doubling in the United States alone.<ref>David Smick, "Now What Do We Do?"  November 10, 2009 [http://www.lexingtoninstitute.org/library/resources/documents/Defense/DavidSmickSpeechattheColonyClub11.10.09.pdf online] </ref>  

Global governments spent an astonishing $17 trillion to support the world economy in the form of bailouts, guarantees, and equity market purchases. That $17 trillion represents one quarter of global GDP, but only a fraction of that sum will actually be paid out.<ref>One analyst in 2011 put the figure at $29 trillion. [http://www.levyinstitute.org/pubs/wp_698.pdf $29,000,000,000,000: A Detailed Look at the Fed’s Bailout by Funding Facility and Recipient], James Felkerson, University of Missouri–Kansas City, December 2011.</ref>  Global investment declined by 15% , and global GDP by shrank by nearly $4 trillion, or an amazing 6%.  Global industrial production in the advanced economies dropped a 15%, causing unemployment  to soar around the world, nearly doubling in the United States alone.<ref>David Smick, "Now What Do We Do?"  November 10, 2009 [http://www.lexingtoninstitute.org/library/resources/documents/Defense/DavidSmickSpeechattheColonyClub11.10.09.pdf online] </ref>  

[[File:Empl2009.jpg|thumb|400px]]

[[File:Empl2009.jpg|thumb|400px]]

==Origins==

==Fannie Mae Origins==

The recession began in January 2008 in the financial sector as major banks in the U.S. and Europe got into serious trouble after a decade and a half of investing in bad mortgages. The crisis spread globally due to the fact that many banks, businesses, and pension funds worldwide had invested in these securitized debts. Trouble spread to the [[automobile]] industry, where General Motors and Chrysler went bankrupt in spring 2009, due to a decrease in US consumer demand. They remained solvent by a [[bailout]] involving a taxpayer buy out and bankruptcy reorganization was authorized by President [[Barack Obama]] and Congressional [[Democrat]]s. Existing shareholders received 22 cents on the dollar for their investment, and the unions made no concessions.

The recession began in January 2008 in the financial sector as major banks in the U.S. and Europe got into serious trouble after a decade and a half of investing in bad mortgages. The crisis spread globally due to the fact that many banks, businesses, and pension funds worldwide had invested in these securitized debts. Trouble spread to the [[automobile]] industry, where General Motors and Chrysler went bankrupt in spring 2009, due to a decrease in US consumer demand. They remained solvent by a [[bailout]] involving a taxpayer buy out and bankruptcy reorganization was authorized by President [[Barack Obama]] and Congressional [[Democrat]]s. Existing shareholders received 22 cents on the dollar for their investment, and the unions made no concessions.

===Money===

===Money===

In terms of a monetary explanation, there is far more money around, due to the stimulus programs of the Federal Reserve, Treasury, and Congress. However the velocity (turnover rate) is down to the lowest rate since 1991.  That is, people and business are saving and not spending.  Banks are not lending. The nation’s banks in March 2009 had reserves of $679 billion, up from only $45 billion in August 2008.  Individuals are keeping their cash in the banks, or paying off credit cards and debts, and not buying new merchandise.  The goal of federal stimulus spending is to get consumer spending going, to create jobs and keep businesses from slowing down.<ref>[[Inflation]] can do this -- force people to deplete cash and savings with a "spend now" mentality and damn the consequences of impoverishing themselves and heirs later. Keynes said, "In the long run we're all dead". Keynes is dead, but those alive in 2008 have to live with the consequences of decades of these economic theories elevated to public policy. </ref> If people do start spending again all the extra money will cause inflation, but in that case the Federal Reserve plans to reduce the money supply and, hopefully, restore normalcy and prosperity.<ref> Mark Gongloff, “Best Check on Inflation: Broken Banks,” ’’Wall Street Journal,’’ Mar. 20, 2009</ref>

In terms of a monetary explanation, there is far more money around, due to the stimulus programs of the Federal Reserve, Treasury, and Congress. However the velocity (turnover rate) is down to the lowest rate since 1991.  That is, people and business are saving and not spending.  Banks are not lending. The nation’s banks in March 2009 had reserves of $679 billion, up from only $45 billion in August 2008.  Individuals are keeping their cash in the banks, or paying off credit cards and debts, and not buying new merchandise.  The goal of federal stimulus spending is to get consumer spending going, to create jobs and keep businesses from slowing down.<ref>[[Inflation]] can do this -- force people to deplete cash and savings with a "spend now" mentality and damn the consequences of impoverishing themselves and heirs later. Keynes said, "In the long run we're all dead". Keynes is dead, but those alive in 2008 have to live with the consequences of decades of these economic theories elevated to public policy. </ref> If people do start spending again all the extra money will cause inflation, but in that case the Federal Reserve plans to reduce the money supply and, hopefully, restore normalcy and prosperity.<ref> Mark Gongloff, “Best Check on Inflation: Broken Banks,” ’’Wall Street Journal,’’ Mar. 20, 2009</ref>

[[File:Housing$.jpg|thumb|340px]]

[[File:Housing$.jpg|thumb|340px]]

==US==

==US==

The construction of new housing and commercial buildings has fallen off; many commercial buildings and shopping centers have high vacancy rates and may be hard pressed to pay their debts. Housing prices continue low--falling from an average of $255,000 to $180,000, as millions of empty houses are a drag on the market.  Indeed much of the housing activity in 2009 involved sales of foreclosed properties at distress prices.

The construction of new housing and commercial buildings has fallen off; many commercial buildings and shopping centers have high vacancy rates and may be hard pressed to pay their debts. Housing prices continue low--falling from an average of $255,000 to $180,000, as millions of empty houses are a drag on the market.  Indeed much of the housing activity in 2009 involved sales of foreclosed properties at distress prices.

[[Image:U-2009-2.jpg|thumb|275px|right]]

[[Image:U-2009-2.jpg|thumb|275px|right]]

===Auto sector===

===Auto sector===

The automobile industry was in desperate crisis, with General Motors and Chrysler, and numerous parts suppliers, on the verge of bankruptcy.  Ford was in better shape as were the "transplants" like Toyota and Honda that have factories in the U.S. If GM were to shut down, many parts suppliers also would shut, forcing the end of most of GM's North American auto production. Autos would still be imported, though at higher than former prices.  GM and Chrysler were given $17 billion TARP funds in December on condition they present a turnaround plan by Feb. 17, 2009. In its plan GM asked for access to an additional $16.6 billion in federal aid. GM also said it would close 14 U.S. plants, and cut 47,000 global hourly, salaried jobs, and revoke dealerships.  Bankruptcy, GM claimed, could cost the federal government the loss of tax revenue and the loss of 1.3 million jobs across the US, as plants and dealers close down operation.<ref>. For the GM plan see [http://www.treas.gov/initiatives/eesa/agreements/auto-reports/GMRestructuringPlan.pdf GM Plan of Feb 17, 2009]</ref>  

The automobile industry was in desperate crisis, with General Motors and Chrysler, and numerous parts suppliers, on the verge of bankruptcy.  Ford was in better shape as were the "transplants" like Toyota and Honda that have factories in the U.S. If GM were to shut down, many parts suppliers also would shut, forcing the end of most of GM's North American auto production. Autos would still be imported, though at higher than former prices.  GM and Chrysler were given $17 billion TARP funds in December on condition they present a turnaround plan by Feb. 17, 2009. In its plan GM asked for access to an additional $16.6 billion in federal aid. GM also said it would close 14 U.S. plants, and cut 47,000 global hourly, salaried jobs, and revoke dealerships.  Bankruptcy, GM claimed, could cost the federal government the loss of tax revenue and the loss of 1.3 million jobs across the US, as plants and dealers close down operation.<ref>. For the GM plan see [http://www.treas.gov/initiatives/eesa/agreements/auto-reports/GMRestructuringPlan.pdf GM Plan of Feb 17, 2009]</ref>  

==U.S. Politics==

==U.S. Politics==

The Obama Administration has been basing its domestic policies on the assumption that the stimulus package passed in February, 2009, will turn around the economy.  The stimulus money has been spent slowly and little impact is visible by October.  The Treasury assumes that the tax revenue will be there to fund [[Direct spending|permanent new spending]] program in areas such as health care and greening the economy.  It assumes that the rich will recover enough of their investments to pay new taxes--right now tax collections are falling sharply as investments turn sour.  The deficit for fiscal 2009 (which began Oct. 1 2008 and ended Sept. 20, 2009, covering both Bush and Obama terms) is an astonishing $1.4 trillion, or 10% of GDP.

The Obama Administration based its domestic policies on the assumption that its stimulus package passed in February, 2009, would turn around the economy.  The stimulus money has been spent slowly and little impact was visible by 212.  The Treasury assumed that the tax revenue would be there to fund [[Direct spending|permanent new spending]] programs in areas such as health care and greening the economy.  It assumed that the rich will recover enough to pay new, increased taxes. Tax collections only returned to the 2007 alltime, pre-recession level in 2012.  The deficit for fiscal 2009 alone was an astonishing $1.4 trillion, or 10% of GDP. To maintain the appearance of business as usual, keep Social Security and disability payments flowing and maintain defence spending, the federal government added $5 trillion to the [[national debt]] with borrowed money from abroad.

Obama's policies are delaying and retarding the inevitable economic recovery, keeping unemployment high even though the recession Obama inherited was similar to others in the past that gave way to rapid recoveries.<ref>http://online.wsj.com/article/SB10001424052748703278604574624711732528426.html</ref>

Obama delayed the recovery and kept unemployment high in order to permanently increase government spending and reduced the size and increase the burdens of the private sector.<ref>http://online.wsj.com/article/SB10001424052748703278604574624711732528426.html</ref> In the words of [[Rahm Emanuel]], "you don't want let a crisis go to waste."

==Economists==

==Economists==