Oil Crisis in 1973The oil Crisis started in betweenOctober 1973.1973-1974 oil crisis which was led byArab members of the Organization ofPetroleum Exporting Countries (OPEC).
Some fact of Oil Crisis• The crisis also prompted a call for individuals and businesses to conserveenergy, most notably a campaign by the Advertising Council using the tag line "Dont BeFuelish."• The 1973 oil crisis was a major factor in Japans economy shifting from oil-intensiveindustries, and resulted in huge Japanese investments in industries such aselectronics• The UK, Germany, Italy, Switzerland, and Norway banned flying, driving and boating onSundays. The Netherlands imposed prison sentences for those who used more thantheir given ration of electricity.• To help reduce consumption, in 1974 a national maximum speed limit of 55 mph (about88 km/h) was imposed through the Emergency Highway Energy Conservation Act.
Great Recession 2008 National Bureau Of EconomicResearch (NBER) is the officialagency in charge of declaring thatthe economy is in the state ofrecession. Recession is significant decline ineconomic activity lasting morethan few months, which isnormally visible in real GDP, realincome, employment, industrialproduction, & wholesale-retailsales.
Interest RatesThe Fed injected additional reserves and kept interestrates at 2% or less throughout 2002-2004.
House Price ChangeHousing prices were relatively stable during the 1990s, but theybegan to rise toward the end of the decade.From the summer of 2006 home prices started declining.
Bubble that burst…• In the US nearly 10.8% of total homeowners –had zero or negative equity as of March 2008• However, as the home prices were fallingrapidly, the lending companies found them in asituation where loan amount exceeded the totalcost of the house. Eventually, there remained nooption but to write off losses on these loans.• During 2007, nearly 1.3 million U.S. housingproperties were subject to foreclosure activity.• Sales volume (units) of new homes dropped by26.4% in 2007 as compare to 2006.
Sep. 14 Lehman Brothers 4th largest investment bankdeclared bankrupt Bank of America agreed to purchase Merrill Lynch AIG took $82.9 billion to tide over the crisis.
• The lender racked up almost $900 million in losses ashome prices tumbled and foreclosures climbed to a record• Indy Mac shares lost 87 percent of their value in 2007 and another95 percent in 2008
U.S. housing policies are the root cause of the current financial crisis.Other players-- “greedy” investment bankers; foolish investors;imprudent bankers; incompetent rating agencies; irresponsiblehousing speculators; short sighted homeowners; and predatorymortgage brokers, lenders, and borrowers--all played a part.- Peter J. Wallison(lawyer & White House counsel)