Lec 29: Local-Global Geographies of the Great Recession

Question 1

What is a stock exchange?

Answer 1

• Stock exchange: market used to establish what the corporate value of shares is going to be

Question 2

Why do companies issue stocks?

Answer 2

to raise capital, to reinvest

Question 3

How did the stock market differ before and after the 1970s?

Answer 3

before
- functioned at national scale, oligopolistic

after: globalization of financial system
- increased deregulation, increased competition between stock exchanges
- more multinational corporations
- New forms of financial instruments (ex mortgage-based securities

Question 4

what is a blue chip firm

Answer 4

Blue chip: reliable companies that have existed for a while, have been through a few recessions (ex Microsoft, McDonalds)

Question 5

what are 2 key stock exchange indexes?

Answer 5

○ DJIA (Dow Jones), tracks top 30 blue chip companies
§ Blue chip: reliable companies that have existed for a while, have been through a few recessions (ex Microsoft, McDonalds)
○ NASDAQ
§ Focused on high-tech companies (ex Amazon, Apple)
§ Grew a lot during covid

Question 6

What triggered the 2007-09 recession? What were other causal factors (4)

Answer 6

The crash of the US housing market

Other causal factors:
 predatory lending practices: Increased debt burden, diminished savings
 Deregulation of banks, financial institutions (↑ risk taking, people living beyond their means)
 Growing imbalances in world trade
 Commodity bubble (oil: 50$/barrel 2007, 150$ 2008

Question 7

What qualifies as a recession?

Answer 7

2 consecutive quarters of negative GDP growth

Question 8

Why is there a need for a geographical perspective on the great recession?

Answer 8

• Need to look at local geographies/origins or great recession
  
  • New forms of monetary spaces emerging; new layers of geography
    ○ Financial circuits at local level being delocalized
    ○ Global financial circuits looking to connect locally

Question 9

what sets the recent housing bubble apart from past housing bubbles?

Answer 9

The latest housing bubble is much more widespread across country, and much more variation in growth of house prices between countries

ie more countries experience it (globalization), but every country experiences it differently (localization)

Question 10

What changed due to the globalizing of local mortgage lending?

Answer 10

the funding of local mortgages has been delocalized –> pools of capital now come from different places

Question 11

How do housing bubbles change based on geography?

Answer 11

Housing bubbles differ from one place to the next.
for example, midwestern states grow slowly and steadily. sunny destinations, in contrast, experience fast peaks and fast drops

Question 12

Describe the local geographies of foreclosures

Answer 12

foreclosure rates are highest in sunny states and the east coast. this shows that geography matters in the economy!

foreclosure is when mortgage payments are worth more than the house, so people foreclose because they cannot pay their mortgage loans anymore

Question 13

Why do some say that a new ROA and MOSR have emerged after the great recession?

Answer 13

because there has been a reregulation of financial acitivities!
- nationalization of failing financial institutions and bailout in US
- bailout packages in Europe also