Decades ago, if someone had trouble affording a medical procedure or paying a child’s hospital bill, friends and community members sometimes organized bake sales, car washes or other fundraisers to help out.
As the U.S. financial crisis unfolded, President Bush and members of Congress authorized on Oct. 3, 2008, a rescue package called the Troubled Asset Relief Program (TARP). Many policymakers believed that the U.S. economy was, in the words of Federal Reserve Chairman Ben Bernanke, on the verge of ‘‘a cataclysm that could have rivaled or surpassed the Great Depression.’’
In recent years, the issue of ballooning national debt has surfaced in a variety of countries around the world, and the United States, of course, is no exception.
Recent research has produced a variety of theories and insights that apply to this issue, and much academic scholarship looks to draw lessons from economic history. Here are some relevant studies and working papers.
Public debt levels in many of the world’s advanced economies, including the United States, have risen to levels not seen since World War II. History suggests that reversing this trend will not be painless and will require a number of years to accomplish. Indeed, the examples of debt crisis and bailouts in countries such as Greece, Ireland and Portugal may portend a difficult future for other countries.
International trade was one of the many victims of the 2009-2010 global financial crisis. World trade flows declined by up to 9% in 2009, a third more than the 6% drop in industrial output and three times the 2.5% decrease in per-capita income. Countries with smaller economies suffered even more, with some showing a 30% decrease in the second half of 2008.
Much research has been done on the recent boom and bust of the housing market in the United States, and housing’s impact on the labor market has been a topic of increasing interest among academics and policy makers.
After the 2008 collapse of Lehman Brothers, two reasons are often cited for bailing out banks. First, it is assumed that bankruptcy greatly reduces the value of a firm’s assets. Second, such an action would have negative effects on the firm’s lenders that would ripple outward. If a company is sufficiently large, it’s seen as “too big to fail,” and thus must be bailed out.
