Solutions of the 2008 Financial Crisis

http://www.economist.com/news/schoolsbrief/21584534-effects-financial-crisis-are-still-being-felt-five-years-article

The article above, talks about the effects of the financial crisis and how it happened. Many of the most powerful financial institutions collapsed. The financial crisis had many causes that contributed to the massive collapse of the world's financial system. One of those simply being greed. Homeowners wanted to become rich, so they started flipping real estate. Most of them didn't have enough equity on their homes, so they needed up owing more on their mortgage than they could pay off. Bankers were benefiting by paying subprime mortgages, so they didn't regulate it as much as they should have. The burning of defaults, led to major hedge funds collapsing. This led many people to proclaim an end to credit risk, which allowed banks to insure against loan defaults. Most financial institutions couldn't account for or even cover these liabilities. 

It was the risky, irresponsible lending and financial practices that resulted in the biggest crisis since the Great Depression. All economies require safeguards to avoid heavy amount of risk, yet bankers and financial sectors all missed these. Regulators mishandled the crisis, failed to keep economic imbalances in check and failed to exercise proper oversight of financial institutions. One solution should have been the way banks lend out money. Regulators and central banks need to ensure that banks are borrowing less and need to regulate how they obtain their money. For this to happen, banks must raise capital and clear up their balance sheets. Another solution is having a legal authority system to regulate financial firms from becoming too big and too interconnected. One of the biggest issues of the financial crisis in 2008, was not having a system in place that dealt with the fall out and the troubled institutions. Organized exchanges must be in place and transparency in the market must be met. 

Can We Overcome Inequality?

http://www.aauw.org/research/the-simple-truth-about-the-gender-pay-gap/

In Tuesday’s class, we discussed the many moving arguments that lie within the article written by J. Ann Ticker. Her feminist critique poked holes in the liberalist, nationalist, and Marxist approaches to International Political Economy which have all been created through the eyes of men.  Ticker states that the reason women face inequality is because the economic and political systems have both been constructed through the lenses of men. These masculine creations naturally have been born to favor masculinity because they are simply the ones who put these systems in place. Ticker argues that we must have gender at the forefront when changing the goals and ideals we have in society. For example, we should be working to achieve economic justice for all rather than waging war with another country. That said, it may seem like ticker is ignoring the progress we have made from then until now, but an article written by the AAUW proves she is very correct.   

What do the numbers say? Overall, the gender income discrepancy has gotten better over time which can be expected as the role of a women in society has evolved too. Women are no longer just child-bearers. They are educators, CEOs, inventors, writers, and many other unique additions to the world we live in. From the years 1960 to 2015, the pay gap has shrunk by 25%.  This may sound like a huge decrease in gender wage inequality, but it is not. At this rate, women and men would be projected to earn equal wages in the year 2059.  If the rate from 2001 to 2015 was used, the same gender wage equity would be forecasted to occur in the year 2152! On average, women in the United States make about 80% of what men earn in the labor force.  Most economists and other well qualified scholars often link wage disparities with education. After all, the more educated a person is the more likely they will have upward economic mobility. However, the numbers presented by the article above contradicts that argument when focusing in on women. Women who possess some college or an associate degree and women who earn a bachelor degree both earn 75% of what men with the exact same credentials earn. In fact, women who go on to achieve an advanced degree earn 74% of what men earn.  Will statistics such as these discourage women from pursuing roles that are dominated by masculinity? If education is not rewarding hardworking women, will women still want to pursue the higher economic and political positions which can create change. We all go to college and take on debt to gain economically later in life. However, if there is no reward at the finish line will women still attempt to place themselves in positions that can potentially balance out masculinity? Of course, some will still fight to have justice, but how will the rest of women respond?

Ticker believes the economic and political systems are dominated by masculinity. How will we be able to balance out the dominance with femininity if the incentive to do so is simply not there? Is the existence of inequality enough to motivate people to change? It would be foolish to think that men who benefit from a masculine favored world would simply change their ways to create justice. People are selfish and often do what is best for themselves. This means most men will continue to enjoy the world we live in while only some will help to achieve gender equity. What do you guys think?

The Big Issue

http://www.smh.com.au/comment/an-economy-without-growth-is-far-from-our-biggest-worry-20161107-gsk817.html

This article articulates the notion that economists have a biased vision. Their biggest problem is the end to the economic world. Without it, they would not exist. However, there are more crucial issues at play. Climate change is a controversial topic in today's world. The author contends that individuals could adjust to a more steady economy a lot easier than those in the economic sector. Economic growth derives from productivity; productivity is the result of creating more goods than the previous years; technological innovation has allowed for an increase in productivity while still utilizing the same amount of resources. The machines have become more efficient. However, "despite the unending wonders of the digital age, and the digital disruption of industry after industry, they just don't compare with the life-changing and economy-transforming technological advances of the past: electricity, the internal combustion engine, even underground water and sewerage" (Gittins). We might have reached the peak of inventions. Furthermore, aged individuals are starting to save more money because of the current economy, and a decline in population growth - higher savings and lower investments - are also causes of the economy's slower growth. Perhaps a more stagnant economy could be the solution to the world's issues; seemingly, it would only hurt the economist. The Earth would be a greener world, quality of goods can overpower quantity, and individuals would be a lot less stress. The world might have its own plan for itself and us. This specific type of economy might be in its early stages of development already.

In class, we read the Daly reading which discussed steady-state economics. He proposed a number of ideas that are congruent with Gittins article. In Daly's article, he contends that growth is creating even more inequality in the world; the poor are getting poorer and the rich are getting richer. We cannot assume that technology will eventually save us environmentally, and it is also contributing largely to the problem. There are those who believe technology will solve our problems, and those who assume it will not. Overall, resources are being used in all sectors - not just the economic one. There is no infinite substitutionability; resources are going to become more and more scarce. He proposes government restrictions on natural resources, and a steady population - a basic cap on economic growth. This could possibly change the values in society and help solve the climate change issues. However, do we need to make a valiant effort as Daly suggests, or is it naturally occurring as Gittins contends. Additionally, is controlling economic growth as simple as it appears? How would those who promote free trade respond to Daly's proposal? It comes to the point where one has to decide if the Gross National Product is truly worth the benefits which it reaps. It is difficult to have economic growth and prosperity without hurting others (besides the economist) in the process.

Climate Change is a HUGE Problem

http://time.com/4564224/donald-trump-climate-change/

I felt as though it was particularly important to talk about the election and how the outcome will impact action towards environmental protection. 

The link above explores how President-elect Trump could negatively impact climate change action.  Donald Trump has not been quiet about his views regarding global warming and climate change.  He has said “the concept of global warming was created by and for the Chinese in order to make U.S. manufacturing non-competitive.”  The international community, particularly environmental organizations, were all watching the election to see if the U.S. would elect a president who would support global efforts to tackle this problem or if it would elect a president who would reverse or stall progress that has been made.  The article states that climate scientists, policymakers, and diplomats never imagined Trump winning.  Instead, “people who have dedicated their lives to working to save the planet always preferred to focus optimistically on how they could push a President Hillary Clinton further to the left on climate policy” (Worland). 

In regards to the Paris Agreement, Trump has promised to cancel the agreement because it makes the United States less economically competitive in comparison to China.  Luckily, withdrawing from the agreement will take a very long time and making any changes to the agreement would essentially be impossible.  However, Trump could decide to not adhere to the accord since it is non-binding and there are no repercussions for non-compliance. 

As we have discussed in class before, the United States is a global hegemon.  Due to this, the U.S. has typically felt the obligation to adhere to international treaties, at least in appearance.  The U.S. sets a precedent for other countries.  If the U.S. were to not uphold the standards set by the Paris Agreement other countries will not see any incentive or need to follow the agreement either.  This would be dangerous.  Climate change is a global problem and needs to be combatted by the international community as a whole.  If Donald Trump moves towards eliminating efforts or disregarding progress that has been made the climate change situation will be disastrous.   

Trump has said he will get rid of much environmental regulation that is currently in place in order to help industries.  To what extent does helping industry even matter when there will be no industry in the future if combating global warming is not the first priority.  Trump needs to understand that economic progress is not going to help people if it is at the expense of the environment.  It does not matter if pollution happens in the Untied States, China, or Australia.  It all goes into the shared world and impacts everyone.  Global consciousness and cooperation is essential.

The reality is that Donald Trump has been elected president.  Individuals and organizations will have to fight even harder to keep the United States, and ultimately the world, on a proactive path towards cutting carbon emissions and keeping climate change policy a priority.  The link posted above seems to try and be optimistic about the future of climate change.  I will try and do the same.

What Came First ... The Democracy or the Peace?

http://www.nation.co.ke/oped/Opinion/double-deficit-development-democracy-enabler-violent-extremism/440808-3426258-12fqf4b/

      In this article, an international conference in Turkey was held to inform youth on how they can prevent and counter violent extremism. This can include issues such as terrorism. The conference leaders stated the generalized wisdom that the absence of a democracy and development results in violent extremism within a country. In order for development to occur, peace needs to be established beforehand. For instance. in Africa the number of youth is rising because individuals now have access to life-saving medicine and services. Moreover, Africa is also experiencing a number of threats due to people's radical ideologies and beliefs. They are in dangers. Overall, in 2000 the number of deaths resulting from terrorism between Iraq, Nigeria, Afghanistan, Pakistan, and Syria was 3,329. In 2014, that number rose to 32, 685. These violent actions have a huge impact on global peace and has made individuals rethink their solutions to curbing this type of extremism. Previously, it was said that democracies do not fight each other; it was believed that from a democracy comes peace. This article contends that this is a false concept. On the other hand, democracy cannot occur without peace. Therefore, democracies are not countering violent extremism. The act is actually resulting from losers in the elite class taking up arms because they did not get the results they had hoped for. This jeopardizes democracy, peace, and development. Recently, radical groups such as ISIS have surfaced to create as much chaos and violence as possible to get their message across. They are fueled by the technological impacts of globalization, such as being able to spread their ideologies rapidly through the internet. They have a negative impact on individuals; mostly the youth suffer. In order to stop this, democracy is not going to be the solution. Instead one must attempt to understand violent extremism and strategies from this tactic should be implemented.
      In class, we discussed the democratic peace theory. In summary, it states that two democracies do not fight each other. For starters, they have similar ideologies and thus have less to disagree on. Moreover, individual leaders rather than a group of radical individuals decide what wars democracies enter based on its probability of winning; there is much thought before diving into violence. Any democracy is considered relatively strong. Although they can enter wars, democracies tend to solve issues in other ways. War is considered a last resort. Conflict settlement is usually attempted beforehand. The article believes that the democratic peace theory is inaccurate in the sense that this type of government can actually create the peace. Conversely, democracies come from this armistice. Thus a somewhat spurious relationship is present. Usually with democracies come peace. However, there is a third variable. This is knowledge on violent extremism and strategies to counter it. When a country is efficiently developed and strong, they will be able to produce such counteractive measures.
      What do you guys think about the correlation between peace and democracy?

Armed Nonstate Actors in a Globalized World

Link: http://www.newstatesman.com/international-politics/2014/06/isis-and-global-rise-non-state-actors

In addition to this link, I am going to be combining ideas from Friedman's "The World is Flat" and ideas regarding how globalization reduces war.

Stéphane Paquin writes that "in today's world, there are states that have no real power and non-state actors that, depending on the issues, wield considerable power" (Paquin 81).  In today's world, it is becoming increasingly easy for nonstate actors to gain influence. The link above brings light to the global rise of armed nonstate actors and terrorist groups, in particular, the rise of ISIS.  It states, "In geopolitical terms, Isis's challenge to traditional state authority and national divisions is also emblematic of the explosion of terror-driven non-state actors around the globe."  The number of armed nonstate actor groups that are operating throughout the world has been on the rise.  They do not operate in the way traditional armies operate.  This has led to these groups being incredibly harmful and exceptionally dangerous.  Armed non-state actors have changed the way we see and combat violence.  They are "unbound by the constraints of law and, in many cases, quick to extreme violence to bolster their influence and aims, non-state actors are a growing threat and one of which we should be wary."

Some argue that globalization has been beneficial because it has brought the world closer, more connected, and, in the words of Thomas Friedman, globalization has flattened the world.  With this, "what the flattening of the world means is that we are now connecting all the knowledge centers on the planet together into a single globalized network" (Friedman 8).  Although Friedman argues that globalization has been a relatively good thing, he is also filled with dread because of the "obvious fact that it's not only the software writers and computer geeks who get empowered to collaborate and work in a flat world.  It's also al-Qaeda and other terrorist networks" (Friedman 8).  In looking at the link posted above, you can see that this is happening.  Many scholars have stated that the growth in technology has had benefits for economic markets; however, the growth of technology has also helped armed nonstate actors gain influence.  Terrorist networks utilize the Internet to recruit and spread their message.  So, although technology has grown economies, technology has also grown a new form of conflict.

It has also been argued that globalization has reduced the likelihood of states going to war.  This has been because of the dependency of states on other states for trade.  Trade has helped the world become one place.  Countries are less likely to go to war due to the economic implications of it.  It is too risky.  Particularly for democracies fighting democracies; therefore, war has been less common.  Though this may be true, modern conflict has not been defined as war; rather, it is defined more in terms of conflict between states and armed nonstate actors.  Due to this, it cannot be argued that globalization has led to peace.  Nations have become more peaceful to each other, but this cannot be said for states and armed nonstate actors.  Globalization and the spread of technology has increased nonstate actor influence.  Looking at this, it can be argued that globalization has not decreased violence and fostered peace.  This is one way that globalization has had a negative impact.  The playing field created by a flattened world has been "leveled in a way that draws in and superempowers a whole new group of angry, frustrated, and humiliated men and women" (Friedman 8).

Too Risk Averse?

https://www.americanactionforum.org/research/dodd-frank-at-4-more-regulation-more-regulators-and-a-sluggish-housing-mark/

The 2008 global financial crisis was fueled by a combination of ignorance and greed. On one side, many citizens hoped to fulfill the American dream that we all strive to have.  That very dream became a reality for thousands of Americans looking to acquire their first homes. Due to a lack of knowledge of mortgages and adjustable rates many dreams were snatched away when the rates hiked to costs that not even the wealthiest Americans could afford.  Once derivatives and credit default swaps made their way into the housing market, massive amounts of bad credit were being passed around like a hot potato. With no able to pay their own mortgages, many third parties who were betting on the so called safest securities were left with large debts they could not afford. Since the collapse of the housing market and stock market, hundreds of regulations have been passed to assure that greedy financial predators cannot take advantage of Americans. In fact, the Dodd-Frank Act of 2010 was enacted to regulate the buildup of risky loan agreements while creating more transparency within financial institutions.  Two years ago several analysts at the American Action Forum compiled research to see if the policy had been effective thus far.

Overall, there are 398 implementations incorporated in the Dodd-Frank Act. Right off the bat, the total costs of lending have skyrocketed by billions of dollars since it was passed. In order to provide the necessary transparency needed to keep financial institution in check the Dodd-Frank Act has required banks and creditors to report financial statements more frequently and more accurately. These regulations have increased the costs of lending by $6.5 billion in 2014. With the prices of loans going up many smaller banks have had to eliminate certain consumer incentives that help them compete with the larger creditors. The number of jobs in the financial sector have also increased due to these regulations. Firms with more than 1000 employees have increased by nearly 10.5% since 2010. While the act may not have been specifically passed to increase the labor force this indirect effect has been a positive on the economy. Furthermore, the Dodd-Frank Act has made it tougher for all people to get credit. The strict regulations have forced lenders to be extremely conservative since the crisis. Since the implementations, low-income borrowers, young adults, and minorities have all seen financial products and credit disappear. This makes sense because it was lending large amounts of money to low-income people and young people with no ability to repay their debts that put the economy in a tough spot years ago. However, are the regulations too tight? Firms need to borrow capital to expand or to stay afloat at during certain times. With creditors scared to take risks, the Dodd-Frank Act seems to mitigating economic growth. Figure 2 in the article shows the average recovery times (in months) of types of loans as a percentage of Gross Domestic Product. All loans are clearly under the forecasted percentage values and have no indication of fully recovering. Is there a perfect medium or will the regulations of the Dodd-Frank Act always be too strict?