A Tempestuous Season:
The 2008 Financial Crisis and its Aftermath
October 1, 8, 15, 22
Associate Professor of Business Administration and Economics Rick Eichhorn will give a full overview of the 2008 financial crisis, from the origins of the crisis in the housing market bubble and the bizarre unregulated financial instruments that shook the foundations of the worldwide financial system, to the eventual recovery (we hope).
Eichhorn will discuss the important channels by which financial shocks eventually will, and in fact did, affect spenders in the economy. Of particular importance is the key role that regulators in financial markets play. Financial markets are unlike any of the markets we spend our money in, and the general public does not have a fundamental understanding of financial instruments. The nature of many of these instruments, while providing an avenue for rapid economic expansion, makes the system inherently unstable and, when poorly regulated, eventually leads to crisis; a point borne out by frequent, consistent historical episodes.
When a crisis develops and spills into the real economy,what is a policy maker to do? What are the options, and maybe more fundamentally, should the policymaker actually use them? The Classical/Keynesian debate in economics has raged since Keynes threw down the gauntlet in 1923 with "A Tract on Monetary Reform." Keynesian economics involves using the tools that policymakers have at their disposal to stabilize the economy.
In this crisis, even as some were denying the very efficacy of tools in general, the monetary authority was effectively inventing new tools along the way. Fiscal policy options were debated, delayed, stripped down, porked up, passed, and generally criticized, while monetary policy options lumbered in unnoticed. In the end, did it work, and what did we learn? We won't know until, as Keynes wrote, "the ocean is flat again."
Heather Lewis ‘09
"Once my freshman year, my roommate, Ali, and I were both friends with the same Japanese student, Naoko, and the three of us orchestrated a massive, in-door Capture-the-flag game."
