The Economic Crisis of 2008

General Resources for Teachers  **  Video Links ** Other Resources  **  Selected Readings

General Resources for Teachers

          America's Economic Crisis by the Constitutional Rights Foundation (CFR) offers both teachers and students a variety of materials intended to help describe the current crisis within its historical context.  By examining  historical events, contributing factors and the ensuing forces behind the  recoveries, the selected CRF's readings, discussion questions and Internet based exercises promise to actively engage interested individuals..  This engagement will help anyone with a quest to describe the current crisis, discover historical similarities between past and present, identify differences, and benefit from the lessons learned in the past. 

          Anatomy of a Train Wreck: Causes of the Mortgage Meltdown by The Independent Institute, by Stan J. Liebowitz focuses on the mortgage industry and analyzes how its meltdown contributed to the current crisis.   This in-depth article is intended for teachers interested in advancing and broadening their understanding of the mortgage aspect of the crisis.  

          A Balance Sheet Exercise by the Federal Reserve Bank of St. Louis.  This exercise helps teachers and students understand how the policy change at the Federal Reserve Bank contributed to the current crisis.

          The Crash of 2008: Cause and Aftermath [PDF]. Authored by James Gwartney, David Macpherson, Russell Sobel and Richard Stroup, this book provides a comprehensive analysis of the current economic crisis which is likely to be the most important macroeconomic event of our lifetime. It addresses the cause, analyzes the future, and considers the often asked question of whether the economy is headed for another Great Depression. The Crash of 2008 PowerPoint slides [PPT] will help teachers communicate valuable information to students.  Multiple choice questions for testing available on request. 

          “Economic Insights – The Genesis of a Crisis” by the Foundation for Teaching Economics is a brief article.  It provides an overview of three decades of regulatory and market forces and identifies the events that have contributed to the recent crisis.  This piece provides a solid foundation from which to observe and analyze today’s turbulent economy. It is not intended to be a complete explanation, nor does it address every point and issue.  However, it is well written, concise and a good resource.

          Finance and Responsible Lending by Thirteen Ed Online is a lesson plan that uses a video segment from the THE ASCENT OF MONEY and highlights the role of banks and how creditors make lending decisions.   Specifically, high school students will learn about the components of creditworthiness.  The lesson plan addresses the basics of credit risk.  Extended activities include the ability for a student to research personal business interests and discover what it will take to achieve a creditworthy rating.   

          Globalization and the Economic Crisis by the Choices Program at Brown University's Watson Institute for International Studies is a lesson plan that asks students to analyze a series of political cartoons.  Through a series of well structured questions, students provide answers that help clarify the relationship between globalization and the economic crisis.

          Stock Market Teachers and Others:  Resources for Understanding the Crisis posted by the Kentucky Council on Economic Education provides a plethora of links to materials on the various facets of the crisis.  

          The Subprime Mortgage Crisis: Who Messed Up? Lesson plan by Reaching Up, Reaching Out sponsored by Raleigh Charter High School stages a short play that leads students through a skit that explains how loose lending practices, risky homeownership, high default risks, Fannie Mae and Freddie Mac contributed to the build up and the bust in the housing market. 

          Managing Financial Institutions by Curt Anderson of the University of Minnesota, Duluth.  The near-collapse of the U.S. financial sector in September of 2008 left many wondering what went wrong.  Unfortunately, the result was very predictable given the incentives created by a lack of regulation, a high degree of leverage, and earlier financial bailouts provided by the government.  This lesson shows how these factors led financial institutions to engage in overly risky behaviors and what measures can be taken by government to lessen the possibility of this happening again.

          A Word on the Economy: Why Is the Country Facing a Financial Crisis?  This presentation by the St. Louis Federal Reserve Bank is an  audio commentary  that helps economic students in 9-12 and introductory college level courses understand, and it explain the 2008 crisis and provides links to current events.  Check out this easy-to-understand presentation on the current economic situation, developed by Julie Stackhouse, senior vice president of the Fed's Banking Supervision & Regulation division. Additional resources: presentation (no audio, PDF 267 KB) | glossary (PDF 102 KB)

Video Links

          In the four-hour version of THE ASCENT OF MONEY, historian and author Niall Ferguson seeks to explain the financial history of the world, exploring how the complex system of global finance evolved over the centuries, how money has shaped the course of human affairs and how the mechanics of this economic system work to create seemingly unlimited wealth—or catastrophic loss. This video can be broken down and used to illustrate various economic, entrepreneurial and personal finance concepts.  

          MSN Money is partnering with MoneyTrack, a fresh new public television series about finance and investing that features real people. Pam Krueger and Jack Gallagher show you what works and what doesn’t work when it comes to your money.  This website provides numerous  video clips that help  students understand how to  make strategic decisions  during this crisis! 

Other Resources

The Financial Crisis - St. Louis Federal Reserve Bank outlines events in financial markets from February 2007 to the present.  It includes brief descriptions of market events and actions by the Federal Reserve and other government agencies, along with links to press releases, SEC filings, congressional testimony, relative to the St. Louis Fed articles and selected FRED (Federal Reserve Economic Data) graphs. Using primary sources and links to data, the St. Louis Fed site is designed as a hub for finding information related to the crisis.

Credit Crisis: The Essentials - The New York Times
Provides a page devoted to resources about the credit crisis. It includes an overview of the crisis, an interactive media timeline, video of interviews with people across the United States, and links to articles.

Selected Readings

          "Does Regulation Prevent Fraud? The Case of Manhattan Hedge Fund," by Chidem Kurdas (The Independent Review, Winter 2009)   As the failure of the hedge-fund firm Manhattan Capital demonstrates, both government regulators and market players can make mistakes resulting from cognitive biases. Responding to such mistakes by strengthening government watchdogs, although often recommended, reduces both the government   and the public incentive to learn, thereby creating a vicious spiral of regulation, regulatory failure, and can lead to even  more regulation.

          "Terrible Credit Crunch of 2008--The Greatest Hoax of All Time?" by Robert Higgs (1/6/09)  Last September, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke sounded the alarm, warning that credit markets had frozen and calling for an unprecedented bailout of financial institutions, ostensibly to prevent a collapse of the U.S. economy. Politicians and the press took these claims at face value.  However, according to Independent Institute Senior Fellow Robert Higgs, the Federal Reserve's own statistics tell a very different story: the amount of commercial-bank credit outstanding (perhaps the best indicator of credit-market conditions) hadn't actually shrunk, but had instead merely reached a plateau from April to September, 2008. In other words, there was no net contraction of credit!

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