ECON 403 Topics in MacroeconomicsFall 2012MW 4 – 5:15 pm BEH 108Instructor: Bernard MalamudOffice: Beh 502 Phone: 895 – 3294email: bernard.malamud@unlv.eduOffice Hours: MW 11:30 – 12:30, 2:30 – 3:30 pmand by appointmentCourse website at: faculty.unlv.edu/bmalamud

Tulipmania, 1636 - 1637

• Not clear how the bubble was financed/fueled.• Land for tulips?

Bubbles of Note

Mississippi Bubble, 1718-1720John Law

Bank Royale Company of the West (Paper Money) (Mississippi Company)

The bubble animated:http://www.youtube.com/watch?v=ADv5-Pen1L4

South Sea Bubble

Bubble as scam: Insiders bought shares with loans backed by sharesBubble as laughs: http://www.youtube.com/watch?v=QjN8q5rwLooObservations on our bubble, Richard Koo: http://ineteconomics.org/richard-koo

Catalog of Panics, Crises, Collapses: The US Experience

• 1780s: Post-war reconversion recession declining commodity prices farmers squeezed tax collections opposed (Shay’s Rebellion) Constitution adopted to establish federal gov’t credit

• 1819: War of 1812 Boom and inflation Tightening by 2nd Bank - Crisis: Bank failures/Deflation/Defaults/Unemploymt

• 1837: 2nd Bank of US lost charter State bank inflation of Ms

Speculative bubble in land Bank failures, etc.• 1857: Speculation in railroad stocks Failure of Ohio Life Insur. Co.

Tightening by NY banks Bank runsPost Civil War: Business cycles driven by spurts and stops of railroad construction in face of generally tight money tied to gold standard.

Catalog of Panics, Crises, Collapses: The US ExperienceThe Long Depression, 1873 – 1896

Deflation to return to gold (1865 – 1879)+ Budget surpluses to repay Civil War debt (1865 – 1890)

+ Gold standard discipline after 1879 Tight money + Rapid Economic Growth Deflation

Expected deflation Gold Inflows Rapid Growth Deflation1873: Vienna Stock Market Crash Failure of Jay Cooke & Company

I down Y down $ appreciation Deflation Nominal wage down but real wage up Debt burden up

1884: European harvest cycle Gold In…then…Gold out US business cycle

1890: Argentine default Baring Bros. Failure Intl contagion1893: Fear of silver Capital flight from US Recession1907: Commodity speculation Knickerbocker Bank failure

JP Morgan as lender of last resort Establishment of Fed1920-21: Post-WWI reconversion + Tight Money (to put labor in its place)

Short, sharp engineered recession