The Global Credit Crisis, and The
European Debt Crisis:
Sebastián Ramírez R.
Economics Faculty
Universidad Autónoma Latinoamericana
August, 2015
Outline
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1.
2.
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Purpose of my presentation:
Present a brief and useful video-resource that helps
explain the most important business related news in
recent years: The Global Credit Crisis.
Present a brief and useful video-resource that helps
explain the most important business related news in
the world today: The European Debt Crisis.
Show how these explanations offered in these videos
can motivate the teaching of Unit 5. Money (Market
Leader Intermediate), in the English V course.
Introduction

The U.S. and the global economy have been in serious
crisis, and the global recession faced was the worst
economic downturn since the Great Depression of the
early twentieth century.

The lasting impact of this crisis, is what has been
happening with the sovereign debt crisis in Greece,
Portugal, Spain, Ireland, and Italy, as well as the United
States. (European Debt Crisis).

United States has also seen these consequences
with what has happened to the icons of U.S.
big business – General Motors, AIG,
Citigroup, and other big corporations and
banks.

Let’s take a brief look at these once-powerful
icons of the U.S. economy to assess the
magnitude of the damage…
Figure 1. Lehman Brothers stock, 2007-2011 (in dollars and volume traded)
$80
$18
4 cents
Source: Yahoo Finance http://finance.yahoo.com retrieved August 19, 2011.
Figure 2. General Motors Corporation stock, 2007-2011 (in dollars and volume traded)
$40
$5
$1
4 cents
Source: Yahoo Finance http://finance.yahoo.com retrieved August 19, 2011.
Figure 3. Citigroup, Inc. stock, 2007-2011 (in dollars and volume traded)
$55
$26
$2.68
Source: Yahoo Finance http://finance.yahoo.com retrieved August 19, 2011.
Figure 4. American International Group stock, 2007-2011 (in dollars and volume traded)
$1,450
$1,0000
$600
$22
Source: Yahoo Finance http://finance.yahoo.com retrieved August 19, 2011.
Figure 5. Fannie Mae stock, 2007-2011 (in dollars and volume traded)
$50
$22
20 cents
Source: Yahoo Finance http://finance.yahoo.com retrieved August 19, 2011.
Figure 6. Freddie Mac stock, 2007-2011 (in dollars and volume traded)
$70
$63
$32
31 cents
Source: Yahoo Finance http://finance.yahoo.com retrieved August 19, 2011.
Nature of the crisis
The central problem of the crisis was the recurrent
business cycle which operated at the global level. It
manifested itself in a number of ways, including:
 Decline in real wages and rise in super-profits
 The sub-prime mortgage and credit card debt
 Speculative corporate financial activities
 Increased polarization of wealth and income
How Did All This Happen?
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From 1820 to 1970, every decade U.S. workers
experienced a rising level of wages
In the 1970s this came to an end; real wages
stopped rising and they have never resumed since.
The gap between labor and capital grew bigger
The large corporations made huge profits and
had much money at their disposal
They bought other corporations (mergers and
acquisitions) and they put their money into banks
The banks loaned that money (with interest) to
workers who didn’t have money to consume
This was done to raise their purchasing power
because their wages weren’t enough to buy things
Then What?
Since employers no longer raised workers’ wages,
the workers had to go into debt to survive
Debt went up and up and things got out of control
The banks continued to loan money through new
loans (secondary mortgages) at high interest rates,
and this was a profit bonanza for the banks
As corporations increasingly began to
invest abroad (outsourcing production
and services), U.S. workers lost their jobs,
and this led to greater unemployment
Unemployed workers with a lot of debt
were unable to make their mortgage and
credit card payments, and this led to
foreclosures and bankruptcies
This, in turn, led to the collapse of
the banking system, necessitating a
government bailout of the banks
It is only through the nearly trillion dollar
stimulus funds that the U.S. government poured
into the economy to save the banks from default
that a financial collapse was averted
For more details, we shall watch the following
Videos made by Jonathan Jarvis with the support of
Bloomberg Business News.
1. The Crisis of Credit Visualized (2009):
https://www.youtube.com/watch?v=A5ifUCBO
YIw
2. The European Debt Crisis Visualized (2014):
https://www.youtube.com/watch?v=C8xAXJx9WJ
8
After watching each video, I will gladly try to
answer of the questions that you have regarding the
videos and the crises.
Thank You !
Contact Information:
E-mail:
sebastianramirez@businessudea.net