Friday, September 4, 2009

Beginning of Junior Year and Johan Norberg

Another year began at Fordham University this week. I must admit I had grown used to an empty and quiet campus over the summer but the returning students have brought back a lot of life and activity to Rose Hill.

This will be my junior year. I'll have more opportunities to explore the courses offered to American Studies majors, look into taking on a minor (I'm considering African and African American Studies) and put thought into studying abroad in the spring (but probably not).

The year began for me last night at a guest lecture by Johan Norberg. Norberg is a senior fellow at the Cato Institute, a libertarian think tank based out of Washington DC, and the author of two books. The event was co-sponsored by the College Republicans and the Young Americans for Liberty, a new group at Fordham that has just recieved official club status. Since I was one of the first 20 people to arrive I was lucky enough to get a free copy of Norberg's newest book, Financial Fiasco: How America's Infatuation with Homeownership and Easy Money Created the Economic Crisis. The jury is still out on whether I'll actually have a chance to read it as classes started and I'll be hard pressed to find time to do any personal reading until December.

Norberg's lecture focussed on, what else, the current economic crisis. He claims that the crisis has been caused by 7 steps including easy money, home ownership and the creation of the shadow banking system to handle repackaged and redistributed mortgage securities. Norberg admitted that it was a little rude of him to blame the Americans for the crisis (himself a Swede) but assured us that other countries were trying to cause the economic crisis as well, we were just the only one with the size to do it.

The lecture was incredibly informative. At this point I must admit that before last night I would have been unable to explain the economic crisis to anyone who asked beyond mumbling about "subprime mortgages" and "the housing bubble." After last night's talk I feel I have a much better understanding about what happened to cause the economic crisis but unfortunatly, like everyone else, I'm not really any closer to understanding how to fix it.

Norberg claimed that many of the fixes being proposed and enacted now are the same kind of bad decisions that led to the original crisis, such as lowering interest rates and creating lots of liquidity in the market. He also said that by bailing out certain groups that were "too big to fail" we have created a precedent that encourages these groups to participate in the same risky deals that they were before, now safe in the knowledge that if they fail the government and tax payers will be there to bail them out.

At the end of the lecture the floor was opened up for questions and one struck me in particular as an American Studies major. The question was about how China owns a great deal of our debt and whether or not that might actually effect our sovereignty as a nation. Norberg replied that although it is true that China owns an inordinate amount of American debt, and that they are possibly calling for a second reserve currency in the world, China's status as owner of so much US debt actually creates for them a vested interest in American economic success. As he put if "If you owe the bank a hundred dollars, you have a problem, if you owe the bank a million dollars, the bank has a problem."

Overall the lecture was a great way to kick-off the new academic year and I look forward to more stimulating discussions and lectures as the semester progresses and, of course, blogging about it.

1 comment:

Professor Glenn Hendler said...

The most cogent explanation of the economic crisis I've heard appeared on the show "This American Life," which is not usually known for its economic analysis. It had the title "The Giant Pool of Money," and the reporters did a really nice job not only describing the causes of the meltdown, but also evoking the experience of the fake boom we lived through before that from a couple of very different perspectives (for instance, the point of view of a trader in financial instruments as well as that of someone who took out a risky mortgage). You can find a transcript as well as listen to it at .

And now we'll find out if links work in comments, too.