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POL 130 Final Prompt 5: Global economic system (How did global responses…

- - - - Competitive devaluations- race to the bottom
      - Increased barriers to trade
        
        Smoot Hawley Tariff
      - Eventually, FDR's New Deal
      - These policies made the GD substantially more worse than it needed to be
    - - Domestic policy response
        
        Selective bailouts
        
        Bear Stearns, Fannie Mae, Freddie Mac all saved
        
        Lehman Brothers allowed to fail
        
        govt didn’t want to establish a policy of bailing out banks when they do bad things- teaching the other banks a lesson, shows them that there are consequences to their actions
        
        Stimulus package
        
        Decreased interest rates
      - International policy response
        
        G20 pledges $1t to help emerging economies
        
        Sovereign bailouts
        
        Open markets maintained
    - - Bernanke slashed rates lower than they've ever been in the U.S. and then pumped enough liquidity into the system
      - Fiscal policy was also more aggressive. Congress eventually approved the $700 billion TARP bank bailout followed by the $831 billion stimulus package in 2009.
- - - - What is China's economy implodes?
        
        Interest rates already near zero
        
        Congressional Gridlock
        
        Global commitment to openness is eroding
        
        Uncertain whether policy response would resemble 1929 or 2009
        
        China also has an enormous amount of debt
        But it could be the next sit of a debt crisis
        To get out of the recession in 2008, china used a huge stimulus package, similar to what FDR did
        For now, the Chinese economy is still growing
    - - People and less developed countries are bitter at institutions such as the WTO and IMF
  - - - If the GD showed us one thing, its that you can't waste time with this sort of this and you have to act fast and aggressively, but once interest rates have already hit near 0, where do you go.
        
        Additionally, there is greater congressional gridlock than there was before and simply there are different people in power, there is no guarantee that thy will act similarly
        
        Additionally, there has been a recent backlash to globalization and openness, which could affect policy making too
        
        Also China is HUGE, if China goes under, so will the others, and the US is already in debt and may be more reluctant to bail out/ stimulus packages etc