4. Chapter 5 discusses the roots of the financial crisis in 2007-09 and pins the blame on behavior that was encouraged by neoliberal institutions. The argument is supported by data and a schematic outline of the argument in Figure 5.4.
b. How is rising income inequality linked to the era of neoliberalism? Why would unregulated competitive capitalism create such a huge gap between the average US employed worker and the owner class (those whose wealth comes not from labor but from holding financial assets)?
c. What are asset bubbles and why did they arise from the unregulated/neoliberal era of the 1990’s-2007?
d. Provide a definition and example of risky, speculative behavior on the part of financial institutions. Why weren’t banks more prudent and careful in lending money to corporations and individuals?5. In Question 4 you traced the 3 developments of rising inequality, asset bubbles, and risky lending by financial institutions. In this question, explain the link between these 3 developments the following three “unsustainable trends”:
e. rising household and financial sector debt
f. the spread of toxic financial assets
g. excess productive capacity? Explain the link.6. In his video lecture, Joseph Stiglitz explains that income inequality imposes costs on the US economy and society.
h. Who is Joseph Stiglitz and what are his credentials? Do a Google search
i. What are the myths about income inequality that he hopes to dispel?
j. What costs does income inequality impose on the US economy and society?
7. The “Crisis of Credit” video fills in detail about risky, speculative behavior on the part of banks and how and why banks used leverage to enhance their profits. What is leverage and how does it “turn good deals into great deals?”
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