Any graduating senior knows that the job market is tough. Indeed, the global financial crisis has hit close to home, with the unemployment rate hovering near 10 percent.
It’s almost cliché to talk about. But if we’re going to move forward as a country, we have to sort through the mess that is known as the global financial crisis.
The Great Decisions lecturer for this topic, Stanley Black, will attempt to tackle the complexities. Black is Georges Lurcy Professor Emeritus of Economics at UNC. His work includes service with the President’s Council of Economic Advisers, the Federal Reserve Board and the Department of State.
Great Decisions:
Attend the lecture by Stanley Black on the global financial crisis at 7 p.m. tonight in Carroll Hall, Room 111.
Virtually everything about the global financial crisis is complex — from financial derivatives to toxic assets, collateralized debt obligations and more.
While many students know that the economy is in trouble, it’s important to understand the root causes of this global crisis.
The late 1990s and 2000s saw the U.S. economy flooded with capital, while interest rates were low. This fueled a consumption and credit binge that drove up the prices of many assets, including housing.
This spending was coupled with lax financial regulation. Complex financial transactions were not subject to oversight.
Perhaps the biggest asset bubble of the financial crisis was housing. Housing prices began to rise steadily during the early part of the decade.
Lenders offered mortgages with spiking interest rates to riskier and riskier consumers.
Many Wall Street banks got involved in the mortgage market. They bought the risky mortgages and then repackaged them in complicated financial instruments and sold them on global debt markets.
It wasn’t long before the housing market started to crumble. The bubble began to burst as people started defaulting on their home loans. Once mortgage holders began to default, Wall Street began to realize the extent of the damage. Confidence dropped and banks stopped lending.
Hedge funds, sovereign wealth funds and investment banks all over the world became tangled up in this web of bad mortgages and worthless assets. The crisis started in the U.S. and spread globally.
Credit markets all over the world began to freeze, as banks were too nervous to lend.
Banks re-examined their capital reserves and realized they didn’t have as much as they thought.
Nearly three years after the crisis began spiraling out of control, the world economy is still struggling. Europe has taken the spotlight lately, with the debt-ridden economy of Greece recently receiving a large aid package from Eurozone nations.
Further, we should look with interest at upcoming financial reforms in Congress. Can — or should — Congress pursue stricter regulation of Wall Street. And will it be effective?
Black will discuss the causes and consequences of the global financial crisis in an attempt to make sense of where the world economy stands today and where it is headed.
Sara Wise is a senior German and public policy double major from Charlotte. Contact Sara at wwsara@email.unc.edu. Greg Margolis is the associate opinion editor. Contact Greg at greg_margolis@unc.edu.
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