Explaining the 2008 Economic Crisis

Professor John Kessler delivered this speech to the Fort Wayne Business Weekly Breakfast in Fort Wayne, Indiana on February 16, 2009.

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Introduction

​Good morning and thank you for inviting me to speak to you this morning. I’ve been charged with attempting to explain the economic crisis and its implications in 20 minutes or less. So, needless to say, I’ll have to skip some of the details and just give a quick overview. If you are interested in specific research to support my argument please let me know and I’ll be happy to send it to you.

Princeton Economist Alan Blinder - Murphy’s Law of Economics (PPT Slide)

That being said, I should also point out to you Murphy’s Law of Economics. This comes from Princeton Economist Alan Blinder who served on the Fed Board of Governors and on President Clinton’s Council of Economic Advisors. Murphy’s Law of Economics says that when economist agree on something people don’t want to listen to us, but when we disagree all of the sudden everyone wants us to tell them what to do. For example, economists agree that trade is a good thing and politicians still put up trade barriers, economists disagree on macro economic policy and politicians come running to us to ask what they should do.

Cato Institute ad about stimulus (PPT Slide)

As evidence of this I present to you a current advertisement dealing with the stimulus package. In it President Obama makes a statement that “There is no disagreement that we need action by our government, a recovery plan that will help to jumpstart the economy.” In response to this over 200 economists signed a statement that “With all due respect Mr. President, that is not true.”  Economists do not agree on what macro economic policies should be put in place.
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With that caveat, I humbly give you my interpretation of the current condition of the economy and its implications.

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