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The Economic Crisis - one story, in episodes

Quickest way to understand the crisis! ...................................................................................................................... Economics is not usually taught with flow-charts, but why not? You can see many more connections than by any other form of presentation. This is by far the easiest way for students to see a whole problem. We can show ALL of the events in the SAME picture. The symbols are easy and are introduced as the story proceeds. No need to memorize! (The symbol list is alongside.) ...... About one year into making this series, I realized that the story should be told in another way. Writing and rearrangement of this series is now (Feb. 2013) in progress. ...... The episodes here are included also in a different list: they compose the "macro section" of the "Standard Economics" textbook series (see the links below this text). ...... What I realized is that the crisis has two DIFFERENT visual stories, which are combined: (1) The story of MACRO POLICY shows the difference between demand-side and supply-side effects, and the difference between monetary and fiscal policy. This series starts with this story. (2) The second story is the BUBBLE & CRASH (there were two bubbles in house prices, and in derivatives as repo collateral). This second story concerns balance sheets in both the households and the "shadow banks" (i.e. the credit broker/dealers), and shows how mortgages and derivatives work. This story is sort of a "subplot", though quite a big one! (3) These two stories COMBINE, because the housing and derivatives crash is one of the ways to cause a major demand-side slump in the main economy (although it is not the only way). The total, combined sequence of events goes like this: Bubbles -- Crash -- Bank Bailout -- Slump -- Bad Policy (made by bad politics). This series starts with the slump, then backs up, to tell the beginning. (4) The slump is ongoing because ONLY the banks were bailed out (and are still being bailed out!), but not the housing market. As of the beginning of 2013, well over 1/4 of mortgages were still under water. Monetary policy is relatively ineffective to go any further for now (due to zero interest rates, a rare "liquidity trap") so the urgent need is for fiscal policy, but fiscal policy is being stopped by debt-fear and partisan politics. (5) The most important problem is UNEMPLOYMENT, not debt. Long-term unemployment is individually devastating, hurts whole families, and may cause future social problems. But, instead of solving this critical emergency by increasing the deficit spending temporarily, Washington D.C. is distracted by fears of a distant and avoidable debt crisis. (6) The two stories have different endings and different morals: The macro story shows that we need bigger fiscal spending for the duration of this situation. The bubble story shows the need for prudential requirements, for financial transparency, for higher bank reserves and lending collateral, and for putting an end to "too big to fail". (7) ALL of the above is about SHORT-TERM concerns. The LONG TERM looks at the issues of inequality, globalization, the financialization of the economy, education and innovation, and the necessities and growth of government -- and will be addressed later. So please, do not bother to write any comments about how this series avoids other basic issues! (8) My hope is to accelerate the viewer's comprehension of the complete situation, by finding a place to show each and every step, from both stories, all in the SAME picture.
Quickest way to understand the crisis! ...................................................................................................................... Economics is not usually taught with flow-charts, but why not? You can see many more con...
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