Bernanke explained that between 1996 and 2004, the U.S. current account deficit increased by $650 billion, from 1.5% to 5.8% of GDP. Financing these deficits required the country to borrow large sums from abroad, much of it from countries running trade surpluses. These were mainly the emerging economies in Asia and oil-exporting nations. The balance of payments identity requires that a country (such as the U.S.) running a current account deficit also have a capital account (investment) surplus of the same amount. Hence large and growing amounts of foreign funds (capital) flowed into the U.S. to finance its imports.

Per Bernanke, how much did the U.S. current account deficit increase between 1996 and 2004?

$650 billion

What percentage of GDP was the U.S. current account deficit in 2004?

What emerging economies did the U.S. borrow money from between 1996 and 2004 to finance its imports?

Asia and oil-exporting nations

What type account is needed by the U.S. to balance an account deficit?

capital account

Where did the U.S. obtain capital to finance its imports?

foreign funds


The Fed then raised the Fed funds rate significantly between July 2004 and July 2006. This contributed to an increase in 1-year and 5-year adjustable-rate mortgage (ARM) rates, making ARM interest rate resets more expensive for homeowners. This may have also contributed to the deflating of the housing bubble, as asset prices generally move inversely to interest rates, and it became riskier to speculate in housing. U.S. housing and financial assets dramatically declined in value after the housing bubble burst.

When did the Fed begin raising Fed funds rate significantly?

July 2004

What does ARM stand for:

adjustable-rate mortgage

How do asset prices generally move in relation to interest rates?

inversely

Beginning in July 2004, what did the Fed do to make ARM rates more expensive for homeowners?

raised the Fed funds rate

How did U.S. housing and financial assets react to the housing bubble burst?

dramatically declined in value


Testimony given to the Financial Crisis Inquiry Commission by Richard M. Bowen III on events during his tenure as the Business Chief Underwriter for Correspondent Lending in the Consumer Lending Group for Citigroup (where he was responsible for over 220 professional underwriters) suggests that by the final years of the U.S. housing bubble (2006–2007), the collapse of mortgage underwriting standards was endemic. His testimony stated that by 2006, 60% of mortgages purchased by Citi from some 1,600 mortgage companies were "defective" (were not underwritten to policy, or did not contain all policy-required documents) – this, despite the fact that each of these 1,600 originators was contractually responsible (certified via representations and warrantees) that its mortgage originations met Citi's standards. Moreover, during 2007, "defective mortgages (from mortgage originators contractually bound to perform underwriting to Citi's standards) increased... to over 80% of production".

Richard M. Bowen III testified to the Financial Crisis Inquiry Commission regarding his tenure at which financial institution?

Citigroup

How many underwriters was Richard M. Bowen III responsible for at Citigroup?

What percent of mortgages purchased by Citigroup in 2006 were defective?

In 2006, how many mortgage companies were contractually responsible to meet Citi's standards?

During 2007, what was the percent of defective mortgages not underwritten to Citi's standards?

over 80%


In separate testimony to Financial Crisis Inquiry Commission, officers of Clayton Holdings—the largest residential loan due diligence and securitization surveillance company in the United States and Europe—testified that Clayton's review of over 900,000 mortgages issued from January 2006 to June 2007 revealed that scarcely 54% of the loans met their originators’ underwriting standards. The analysis (conducted on behalf of 23 investment and commercial banks, including 7 "too big to fail" banks) additionally showed that 28% of the sampled loans did not meet the minimal standards of any issuer. Clayton's analysis further showed that 39% of these loans (i.e. those not meeting any issuer's minimal underwriting standards) were subsequently securitized and sold to investors.

Who was the largest residential loan due diligence and securitization surveillance company?

Clayton Holdings

According to Clayton Holdings, how many mortgages issued from January 2006 to June 2007 met underwriting standards?

How many investment and commercial banks were included in Clayton Holdings' analysis of January 2006 to June 2007 loans?

Per Clayton's analysis of loans issued from January 2006 to June 2007, what percent of loans did not meet minimal standards of any issuer?

How many mortgage loans did Clayton Holdings review in their analysis?


Predatory lending refers to the practice of unscrupulous lenders, enticing borrowers to enter into "unsafe" or "unsound" secured loans for inappropriate purposes. A classic bait-and-switch method was used by Countrywide Financial, advertising low interest rates for home refinancing. Such loans were written into extensively detailed contracts, and swapped for more expensive loan products on the day of closing. Whereas the advertisement might state that 1% or 1.5% interest would be charged, the consumer would be put into an adjustable rate mortgage (ARM) in which the interest charged would be greater than the amount of interest paid. This created negative amortization, which the credit consumer might not notice until long after the loan transaction had been consummated.

What is the name for lending that entices borrowers to enter into unsafe secured loans?

Predatory lending

What company used a classic bait-and-switch method by advertising low interest rates?

Countrywide Financial

Which type loan would the consumer be put into instead of the 1% or 1.5% interest rate loan as advertised?

adjustable rate mortgage (ARM)

What was created when the interest charged was greater than the amount of interest paid?

negative amortization

What type predatory lending method did Countrywide Financial use?

classic bait-and-switch


Countrywide, sued by California Attorney General Jerry Brown for "unfair business practices" and "false advertising" was making high cost mortgages "to homeowners with weak credit, adjustable rate mortgages (ARMs) that allowed homeowners to make interest-only payments". When housing prices decreased, homeowners in ARMs then had little incentive to pay their monthly payments, since their home equity had disappeared. This caused Countrywide's financial condition to deteriorate, ultimately resulting in a decision by the Office of Thrift Supervision to seize the lender.

Who sued Countrywide for unfair business practices and false advertising?

California Attorney General Jerry Brown

What type mortgages allowed homeowners to make interest-only payments?

adjustable rate mortgages (ARMs)

What happened to home equity when housing prices decreased?

disappeared

Who made the decision to seize Countrywide after their financial condition deteriorated?

Office of Thrift Supervision

What type credit did borrowers obtaining mortgages from Countrywide have?

weak credit


Critics such as economist Paul Krugman and U.S. Treasury Secretary Timothy Geithner have argued that the regulatory framework did not keep pace with financial innovation, such as the increasing importance of the shadow banking system, derivatives and off-balance sheet financing. A recent OECD study suggest that bank regulation based on the Basel accords encourage unconventional business practices and contributed to or even reinforced the financial crisis. In other cases, laws were changed or enforcement weakened in parts of the financial system. Key examples include:

What economist believed that regulations did not keep up with financial innovation?

Paul Krugman

Who was the U.S. Treasury Secretary dealing with the aftermath of the financial crisis of 2007?

Timothy Geithner

Which group's study suggested that Basel accords encourage unconventional business practices?

OECD

It has been argued that what did not keep up with financial innovation?

regulatory framework

What accords possibly contributed to or reinforced the financial crisis?

Basel


Prior to the crisis, financial institutions became highly leveraged, increasing their appetite for risky investments and reducing their resilience in case of losses. Much of this leverage was achieved using complex financial instruments such as off-balance sheet securitization and derivatives, which made it difficult for creditors and regulators to monitor and try to reduce financial institution risk levels. These instruments also made it virtually impossible to reorganize financial institutions in bankruptcy, and contributed to the need for government bailouts.

What did financial institutions do prior to the crisis?

became highly leveraged

What type financial instruments are off-balance sheet securitization and derivatives?

complex

Who bailed out financial institutions?

government

Which option was nearly impossible for financial institutions to reorganize under?

bankruptcy

What are the type financial instruments that were difficult for creditors and regulators to monitor?

complex financial instruments


From 2004 to 2007, the top five U.S. investment banks each significantly increased their financial leverage (see diagram), which increased their vulnerability to a financial shock. Changes in capital requirements, intended to keep U.S. banks competitive with their European counterparts, allowed lower risk weightings for AAA securities. The shift from first-loss tranches to AAA tranches was seen by regulators as a risk reduction that compensated the higher leverage. These five institutions reported over $4.1 trillion in debt for fiscal year 2007, about 30% of USA nominal GDP for 2007. Lehman Brothers went bankrupt and was liquidated, Bear Stearns and Merrill Lynch were sold at fire-sale prices, and Goldman Sachs and Morgan Stanley became commercial banks, subjecting themselves to more stringent regulation. With the exception of Lehman, these companies required or received government support. Lehman reported that it had been in talks with Bank of America and Barclays for the company's possible sale. However, both Barclays and Bank of America ultimately declined to purchase the entire company.

How many U.S. investment banks significantly increased their financial leverage from 2004 to 2007?

five

U.S. investment banks Increased their financial leverage and also increased their vulnerability to what?

financial shock

Changes in what intended to keep U.S. banks competitive with their European counterparts?

capital requirements

How much debt did the top five U.S. investment banks report in fiscal year 2007?

over $4.1 trillion

What financial institution went bankrupt and was liquidated in 2007?

Lehman Brothers


Behavior that may be optimal for an individual (e.g., saving more during adverse economic conditions) can be detrimental if too many individuals pursue the same behavior, as ultimately one person's consumption is another person's income. Too many consumers attempting to save (or pay down debt) simultaneously is called the paradox of thrift and can cause or deepen a recession. Economist Hyman Minsky also described a "paradox of deleveraging" as financial institutions that have too much leverage (debt relative to equity) cannot all de-leverage simultaneously without significant declines in the value of their assets.

What is an example of something that can be detrimental if too many individuals pursue the same behavior?

saving more during adverse economic conditions

What is it called when too many consumers attempt to save or pay down debt at the same time?

paradox of thrift

What will happen if too many consumers save or pay down debt simultaneously?

can cause or deepen a recession

Who is the economist who described a "paradox of deleveraging"?

Hyman Minsky

Financial institutions cannot all de-leverage simultaneously without a decline in the value of this?

their assets


During April 2009, U.S. Federal Reserve vice-chair Janet Yellen discussed these paradoxes: "Once this massive credit crunch hit, it didn’t take long before we were in a recession. The recession, in turn, deepened the credit crunch as demand and employment fell, and credit losses of financial institutions surged. Indeed, we have been in the grips of precisely this adverse feedback loop for more than a year. A process of balance sheet deleveraging has spread to nearly every corner of the economy. Consumers are pulling back on purchases, especially on durable goods, to build their savings. Businesses are cancelling planned investments and laying off workers to preserve cash. And, financial institutions are shrinking assets to bolster capital and improve their chances of weathering the current storm. Once again, Minsky understood this dynamic. He spoke of the paradox of deleveraging, in which precautions that may be smart for individuals and firms—and indeed essential to return the economy to a normal state—nevertheless magnify the distress of the economy as a whole."

Who was the U.S. Federal Reserve vice-chair in April 2009?

Janet Yellen

What happened soon after the massive credit crunch hit?

we were in a recession

What deepened the credit crunch when demand and employment fell?

recession

What was one of the actions businesses took to preserve cash?

cancelling planned investments

What occurred in nearly every corner of the economy after the financial crisis of 2007?

balance sheet deleveraging


The term financial innovation refers to the ongoing development of financial products designed to achieve particular client objectives, such as offsetting a particular risk exposure (such as the default of a borrower) or to assist with obtaining financing. Examples pertinent to this crisis included: the adjustable-rate mortgage; the bundling of subprime mortgages into mortgage-backed securities (MBS) or collateralized debt obligations (CDO) for sale to investors, a type of securitization; and a form of credit insurance called credit default swaps (CDS). The usage of these products expanded dramatically in the years leading up to the crisis. These products vary in complexity and the ease with which they can be valued on the books of financial institutions.

What term refers to the ongoing development of financial products?

financial innovation

What is an example of financial innovation pertinent to the financial crisis?

adjustable-rate mortgage

What is the abbreviation for a form of credit insurance called credit default swaps?

CDS

What is the financial innovation that bundles subprime mortgages?

mortgage-backed securities (MBS)

What happened to the usage of financial innovation products in the years leading up the financial crisis?

expanded dramatically


CDO issuance grew from an estimated $20 billion in Q1 2004 to its peak of over $180 billion by Q1 2007, then declined back under $20 billion by Q1 2008. Further, the credit quality of CDO's declined from 2000 to 2007, as the level of subprime and other non-prime mortgage debt increased from 5% to 36% of CDO assets. As described in the section on subprime lending, the CDS and portfolio of CDS called synthetic CDO enabled a theoretically infinite amount to be wagered on the finite value of housing loans outstanding, provided that buyers and sellers of the derivatives could be found. For example, buying a CDS to insure a CDO ended up giving the seller the same risk as if they owned the CDO, when those CDO's became worthless.

When did the issuance of CDO peak?

Q1 2007

What was the estimated value of CDO issuance in Q1 2004?

$20 billion

What was the estimated value of CDO issuance at it's peak in Q1 2007?

over $180 billion

What percent of CDO assets were subprime and other non-prime mortgage debt in 2007?

What was the estimated value of CDO issuance in Q1 2008?

under $20 billion


This boom in innovative financial products went hand in hand with more complexity. It multiplied the number of actors connected to a single mortgage (including mortgage brokers, specialized originators, the securitizers and their due diligence firms, managing agents and trading desks, and finally investors, insurances and providers of repo funding). With increasing distance from the underlying asset these actors relied more and more on indirect information (including FICO scores on creditworthiness, appraisals and due diligence checks by third party organizations, and most importantly the computer models of rating agencies and risk management desks). Instead of spreading risk this provided the ground for fraudulent acts, misjudgments and finally market collapse. In 2005 a group of computer scientists built a computational model for the mechanism of biased ratings produced by rating agencies, which turned out to be adequate to what actually happened in 2006–2008.[citation needed]

Which products created more complexity in the financial markets?

innovative financial products

What effect did the introduction of innovative financial products have on a single mortgage?

multiplied the number of actors connected

What did institutions rely more on as increasing distance from underlying assets occurred?

indirect information

What is a type of indirect information that financial institutions and investors used to judge the risk?

computer models of rating agencies

In what year did a group of computer scientists build a model for ratings produced by rating agencies that turned out to be accurate for what happened in 2006-2008?


The pricing of risk refers to the incremental compensation required by investors for taking on additional risk, which may be measured by interest rates or fees. Several scholars have argued that a lack of transparency about banks' risk exposures prevented markets from correctly pricing risk before the crisis, enabled the mortgage market to grow larger than it otherwise would have, and made the financial crisis far more disruptive than it would have been if risk levels had been disclosed in a straightforward, readily understandable format.

What is a measurement of pricing of risk?

interest rates or fees

What is the incremental compensation required by investors for taking on addition risk called?

pricing of risk

According to several scholars, what prevented markets from correctly pricing risk before the crisis?

lack of transparency about banks' risk exposures

How should risk levels have been disclosed according to several scholars?

straightforward, readily understandable format

What was the outcome of the financial crisis since risk levels were not adequately disclosed?

far more disruptive


For a variety of reasons, market participants did not accurately measure the risk inherent with financial innovation such as MBS and CDOs or understand its impact on the overall stability of the financial system. For example, the pricing model for CDOs clearly did not reflect the level of risk they introduced into the system. Banks estimated that $450bn of CDO were sold between "late 2005 to the middle of 2007"; among the $102bn of those that had been liquidated, JPMorgan estimated that the average recovery rate for "high quality" CDOs was approximately 32 cents on the dollar, while the recovery rate for mezzanine CDO was approximately five cents for every dollar.

What did market participants fail to measure accurately?

risk inherent with financial innovation

What are the reasons market participants did not understand the impact financial innovation products would have?

a variety of reasons

How much did JPMorgan estimate was the average recovery rate for high quality CDOs that had been liquidated?

approximately 32 cents on the dollar

How much did JPMorgan estimate was the average recovery rate for mezzanine CDOs that had been liquidated?

approximately five cents for every dollar

How much did banks estimate was the value of CDOs sold between late 2005 to the middle of 2007?


Another example relates to AIG, which insured obligations of various financial institutions through the usage of credit default swaps. The basic CDS transaction involved AIG receiving a premium in exchange for a promise to pay money to party A in the event party B defaulted. However, AIG did not have the financial strength to support its many CDS commitments as the crisis progressed and was taken over by the government in September 2008. U.S. taxpayers provided over $180 billion in government support to AIG during 2008 and early 2009, through which the money flowed to various counterparties to CDS transactions, including many large global financial institutions.

What firm insured obligations of various financial institutions using credit default swaps?

AIG

What does the abbreviation CDS stand for?

credit default swaps

When did the government take over AIG?

September 2008

How much money did taxpayers provide in government support to AIG during 2008 and early 2009?

over $180 billion

What did AIG receive for promising to pay Party A in the event that Party B defaulted?

a premium


As financial assets became more and more complex, and harder and harder to value, investors were reassured by the fact that both the international bond rating agencies and bank regulators, who came to rely on them, accepted as valid some complex mathematical models which theoretically showed the risks were much smaller than they actually proved to be. George Soros commented that "The super-boom got out of hand when the new products became so complicated that the authorities could no longer calculate the risks and started relying on the risk management methods of the banks themselves. Similarly, the rating agencies relied on the information provided by the originators of synthetic products. It was a shocking abdication of responsibility."

Who commented that the super-boom got out of hand when products became so complicated that risk could not be accurately calculated?

George Soros

What happened to financial assets that made them harder to value?

more complex

Who did rating agencies rely on for information to rate financial innovation products?

the originators of synthetic products

When authorities could no longer calculate the risks of complex financial innovation products, who did they rely on for information?

the banks

Who reassured investors by showing the risk of complex financial innovation products was actually less than they proved to be?

international bond rating agencies


Moreover, a conflict of interest between professional investment managers and their institutional clients, combined with a global glut in investment capital, led to bad investments by asset managers in over-priced credit assets. Professional investment managers generally are compensated based on the volume of client assets under management. There is, therefore, an incentive for asset managers to expand their assets under management in order to maximize their compensation. As the glut in global investment capital caused the yields on credit assets to decline, asset managers were faced with the choice of either investing in assets where returns did not reflect true credit risk or returning funds to clients. Many asset managers chose to continue to invest client funds in over-priced (under-yielding) investments, to the detriment of their clients, in order to maintain their assets under management. This choice was supported by a "plausible deniability" of the risks associated with subprime-based credit assets because the loss experience with early "vintages" of subprime loans was so low.

What led to bad investments by asset managers in over-priced credit assets?

a conflict of interest

Who is compensated based on the volume of client assets they have under management?

Professional investment managers

What is the incentive for asset managers to expand their assets under management?

to maximize their compensation

What did many asset managers decide to do to the detriment of their clients?

continue to invest client funds in over-priced (under-yielding) investments

What rationale did asset managers who continued to invest in over-priced investments to the detriment of their clients use?

plausible deniability


Despite the dominance of the above formula, there are documented attempts of the financial industry, occurring before the crisis, to address the formula limitations, specifically the lack of dependence dynamics and the poor representation of extreme events. The volume "Credit Correlation: Life After Copulas", published in 2007 by World Scientific, summarizes a 2006 conference held by Merrill Lynch in London where several practitioners attempted to propose models rectifying some of the copula limitations. See also the article by Donnelly and Embrechts and the book by Brigo, Pallavicini and Torresetti, that reports relevant warnings and research on CDOs appeared in 2006.

Who published "Credit Correlation: Life After Copulas" in 2007?

World Scientific

When did relevant warnings and research on CDOs appear in an article by Donnelly and Embrechts?

The volume "Credit Correlation: Life After Copulas" summarizes a 2006 conference held by what firm in London?

Merrill Lynch

What did the volume "Credit Correlation: Life After Copulas" propose models to rectify?

some of the copula limitations

What year did the book by Brigo, Pallavicini and Torresetti report warnings and research on CDOs?


In a June 2008 speech, President and CEO of the New York Federal Reserve Bank Timothy Geithner—who in 2009 became Secretary of the United States Treasury—placed significant blame for the freezing of credit markets on a "run" on the entities in the "parallel" banking system, also called the shadow banking system. These entities became critical to the credit markets underpinning the financial system, but were not subject to the same regulatory controls. Further, these entities were vulnerable because of maturity mismatch, meaning that they borrowed short-term in liquid markets to purchase long-term, illiquid and risky assets. This meant that disruptions in credit markets would make them subject to rapid deleveraging, selling their long-term assets at depressed prices. He described the significance of these entities:

Who was President and CEO of the New York Federal Reserve Bank in June 2008?

Timothy Geithner

What year did Timothy Geithner become U.S. Treasury Secretary?

In a June 2008 speech, Timoty Geithner placed blame for credit market freezing on which system?

"parallel" banking system

What is the "parallel" banking system also called?

shadow banking system

What is the term defined as being vulnerable by borrowing short-term in liquid markets to purchase long-term illiquid and risky assets?

maturity mismatch


The securitization markets supported by the shadow banking system started to close down in the spring of 2007 and nearly shut-down in the fall of 2008. More than a third of the private credit markets thus became unavailable as a source of funds. According to the Brookings Institution, the traditional banking system does not have the capital to close this gap as of June 2009: "It would take a number of years of strong profits to generate sufficient capital to support that additional lending volume." The authors also indicate that some forms of securitization are "likely to vanish forever, having been an artifact of excessively loose credit conditions."

When did the securitization markets supported by the shadow banking systems start to close down?

spring of 2007

When did the securitization markets supported by the shadow banking system nearly shut-down completely?

fall of 2008

How much of the private credit markets become unavailable as a source of funds?

More than a third

What is the firm who reported that the traditional banking system does not have capital to close the gap as of June 2009?

Brookings Institution

How many years would of strong profit would it take to generate enough capital to support additional lending?

a number of years


Economist Mark Zandi testified to the Financial Crisis Inquiry Commission in January 2010: "The securitization markets also remain impaired, as investors anticipate more loan losses. Investors are also uncertain about coming legal and accounting rule changes and regulatory reforms. Private bond issuance of residential and commercial mortgage-backed securities, asset-backed securities, and CDOs peaked in 2006 at close to $2 trillion...In 2009, private issuance was less than $150 billion, and almost all of it was asset-backed issuance supported by the Federal Reserve's TALF program to aid credit card, auto and small-business lenders. Issuance of residential and commercial mortgage-backed securities and CDOs remains dormant."

What economist testified to the Financial Crisis Inquiry Commission in January 2010?

Mark Zandi

In January 2010, what markets did Mark Zandi testify about that remain impaired and investors anticipate more loan losses?

securitization markets

What was the value of CDOs at their peak in 2006?

close to $2 trillion

What was the private issuance of CDOs in 2009?

less than $150 billion

Almost all of the asset-backed issuance in 2009 was supported by what Federal Reserve program?

TALF


Rapid increases in a number of commodity prices followed the collapse in the housing bubble. The price of oil nearly tripled from $50 to $147 from early 2007 to 2008, before plunging as the financial crisis began to take hold in late 2008. Experts debate the causes, with some attributing it to speculative flow of money from housing and other investments into commodities, some to monetary policy, and some to the increasing feeling of raw materials scarcity in a fast-growing world, leading to long positions taken on those markets, such as Chinese increasing presence in Africa. An increase in oil prices tends to divert a larger share of consumer spending into gasoline, which creates downward pressure on economic growth in oil importing countries, as wealth flows to oil-producing states. A pattern of spiking instability in the price of oil over the decade leading up to the price high of 2008 has been recently identified. The destabilizing effects of this price variance has been proposed as a contributory factor in the financial crisis.

Following the collapse in the housing bubble, what happened to a number of commodity prices?

Rapid increases

How much did the price of oil increase from early 2007 to 2008?

nearly tripled from $50 to $147

What did the price of oil began doing when the financial crisis began to take hold in late 2008?

plunging

What is one of the reasons experts believe contributed to the volatilaty in oil prices in 2008?

monetary policy

Consumers tend to have less money to spend on other goods, when the price of which commodity is higher?

gasoline


In testimony before the Senate Committee on Commerce, Science, and Transportation on June 3, 2008, former director of the CFTC Division of Trading & Markets (responsible for enforcement) Michael Greenberger specifically named the Atlanta-based IntercontinentalExchange, founded by Goldman Sachs, Morgan Stanley and BP as playing a key role in speculative run-up of oil futures prices traded off the regulated futures exchanges in London and New York. However, the IntercontinentalExchange (ICE) had been regulated by both European and U.S. authorities since its purchase of the International Petroleum Exchange in 2001. Mr Greenberger was later corrected on this matter.

Who was the former director of the CFTC that testified before the Senate Committee on Commerce, Science, and Transportation on June 3, 2008?

Michael Greenberger

Who did Michael Greenberger erronesously name as a key player in speculative run-up of oil futures?

IntercontinentalExchange

Who founded the Atlanta-based Intercontinental Exchange?

Goldman Sachs, Morgan Stanley and BP

Who purchased the International Petroleum Exchange in 2001?

IntercontinentalExchange (ICE)

Where are regulated future exchanges located?

London and New York


Feminist economists Ailsa McKay and Margunn Bjørnholt argue that the financial crisis and the response to it revealed a crisis of ideas in mainstream economics and within the economics profession, and call for a reshaping of both the economy, economic theory and the economics profession. They argue that such a reshaping should include new advances within feminist economics and ecological economics that take as their starting point the socially responsible, sensible and accountable subject in creating an economy and economic theories that fully acknowledge care for each other as well as the planet.

Who is one of the feminist economists that believe the financial crisis revealed a crisis of mainstream economics and call for a complete reshaping of the economy?

Ailsa McKay

Feminist economists Ailsa McKay and Margunn Bjornhold believe that the financial crisis and response reveal a crisis of ideas in this?

mainstream economics

According to feminist economists McKay and Bjornholt, would type economics should be included in a reshaping?

feminist economics

What do economists McKay and Bjornholt want to occur in the economy, economic theory, and economics profession?

a reshaping


Current Governor of the Reserve Bank of India Raghuram Rajan had predicted the crisis in 2005 when he became chief economist at the International Monetary Fund.In 2005, at a celebration honouring Alan Greenspan, who was about to retire as chairman of the US Federal Reserve, Rajan delivered a controversial paper that was critical of the financial sector. In that paper, "Has Financial Development Made the World Riskier?", Rajan "argued that disaster might loom." Rajan argued that financial sector managers were encouraged to "take risks that generate severe adverse consequences with small probability but, in return, offer generous compensation the rest of the time. These risks are known as tail risks. But perhaps the most important concern is whether banks will be able to provide liquidity to financial markets so that if the tail risk does materialise, financial positions can be unwound and losses allocated so that the consequences to the real economy are minimised."

Who was the current Governor of the Reserve Bank of India that predicted the crisis in 2005?

Raghuram Rajan

When did Raghuram Rajan become chief economist the the International Monetary Fund?

In 2005, where did Rajan deliver a controversial paper that was critical of the financial paper?

at a celebration honouring Alan Greenspan

What was the name of Raghuram Rajan's controversial paper delivered in 2005?

"Has Financial Development Made the World Riskier?"

What are risks called that generate severe adverse consequences with small probability but generous compensation the rest of the time?

tail risks


The financial crisis was not widely predicted by mainstream economists except Raghuram Rajan, who instead spoke of the Great Moderation. A number of heterodox economists predicted the crisis, with varying arguments. Dirk Bezemer in his research credits (with supporting argument and estimates of timing) 12 economists with predicting the crisis: Dean Baker (US), Wynne Godley (UK), Fred Harrison (UK), Michael Hudson (US), Eric Janszen (US), Steve Keen (Australia), Jakob Brøchner Madsen & Jens Kjaer Sørensen (Denmark), Kurt Richebächer (US), Nouriel Roubini (US), Peter Schiff (US), and Robert Shiller (US). Examples of other experts who gave indications of a financial crisis have also been given. Not surprisingly, the Austrian economic school regarded the crisis as a vindication and classic example of a predictable credit-fueled bubble that could not forestall the disregarded but inevitable effect of an artificial, manufactured laxity in monetary supply, a perspective that even former Fed Chair Alan Greenspan in Congressional testimony confessed himself forced to return to.

Who was one of the only mainstream economist to predict the financial crisis?

Raghuram Rajan

What did Raghuram Rajan speak of?

Great Moderation

Who credit 12 heterodox economists with predicting the crisis in his research credits?

Dirk Bezemer

How did the Austrian economic school regard the crisis?

as a vindication

Which former Fed Chair confessed in Congressional testimony to being forced to return to lax monetary supply?

Alan Greenspan


A cover story in BusinessWeek magazine claims that economists mostly failed to predict the worst international economic crisis since the Great Depression of the 1930s. The Wharton School of the University of Pennsylvania's online business journal examines why economists failed to predict a major global financial crisis. Popular articles published in the mass media have led the general public to believe that the majority of economists have failed in their obligation to predict the financial crisis. For example, an article in the New York Times informs that economist Nouriel Roubini warned of such crisis as early as September 2006, and the article goes on to state that the profession of economics is bad at predicting recessions. According to The Guardian, Roubini was ridiculed for predicting a collapse of the housing market and worldwide recession, while The New York Times labelled him "Dr. Doom".

Which magazine ran a cover story claiming that most economists failed to the the financial crisis?

BusinessWeek

The financial crisis of 2007 was the worst economic crisis since which crisis that occurred in the 1930s?

Great Depression

Which school at University of Pennsylvania examined in their online business journal why economists failed to predict the crisis?

The Wharton School

Which economist did the New York Times state warned of a crisis as early as September 2006?

Nouriel Roubini

What was economist Roubini called by the New York Times for predicting a collapse of the housing market?

"Dr. Doom"


Stock trader and financial risk engineer Nassim Nicholas Taleb, author of the 2007 book The Black Swan, spent years warning against the breakdown of the banking system in particular and the economy in general owing to their use of bad risk models and reliance on forecasting, and their reliance on bad models, and framed the problem as part of "robustness and fragility". He also took action against the establishment view by making a big financial bet on banking stocks and making a fortune from the crisis ("They didn't listen, so I took their money"). According to David Brooks from the New York Times, "Taleb not only has an explanation for what’s happening, he saw it coming."

Who wrote the 2007 book The Black Swan?

Nassim Nicholas Taleb

What journalist from the New York Times stated his believe in Nassim Nicholas Taleb?

David Brooks

What did Nassim Nicholas Taleb warn about for years prior to the financial crisis of 2007?

the breakdown of the banking system

What did Nassim Nicholas Taleb make a fortune on by making a big financial bet?

banking stocks


Market strategist Phil Dow believes distinctions exist "between the current market malaise" and the Great Depression. He says the Dow Jones average's fall of more than 50% over a period of 17 months is similar to a 54.7% fall in the Great Depression, followed by a total drop of 89% over the following 16 months. "It's very troubling if you have a mirror image," said Dow. Floyd Norris, the chief financial correspondent of The New York Times, wrote in a blog entry in March 2009 that the decline has not been a mirror image of the Great Depression, explaining that although the decline amounts were nearly the same at the time, the rates of decline had started much faster in 2007, and that the past year had only ranked eighth among the worst recorded years of percentage drops in the Dow. The past two years ranked third, however.

Who is the market strategist that believes distinctions exist between the current crisis and the Great Depression?

Phil Dow

How much did the Dow Jones average fall during a period of 17 months?

What was the percentage the Dow Jones fell in the Great Depression?

Who was the chief financial correspondent of The New York Times in March 2009?

Floyd Norris


One of the first victims was Northern Rock, a medium-sized British bank. The highly leveraged nature of its business led the bank to request security from the Bank of England. This in turn led to investor panic and a bank run in mid-September 2007. Calls by Liberal Democrat Treasury Spokesman Vince Cable to nationalise the institution were initially ignored; in February 2008, however, the British government (having failed to find a private sector buyer) relented, and the bank was taken into public hands. Northern Rock's problems proved to be an early indication of the troubles that would soon befall other banks and financial institutions.

Which medium sized British bank was the first victim of the financial crisis?

Northern Rock

Who did Northern Rock request security from?

Bank of England

When did Northern Rock investors panic and a bank run begin?

September 2007

When was Northern Rock taken into public hands?

February 2008

Which bank early problems in 2007 were an indicator of the troubles that would soon befall other banks and financial institutions?

Northern Rock


The first visible institution to run into trouble in the United States was the Southern California–based IndyMac, a spin-off of Countrywide Financial. Before its failure, IndyMac Bank was the largest savings and loan association in the Los Angeles market and the seventh largest mortgage originator in the United States. The failure of IndyMac Bank on July 11, 2008, was the fourth largest bank failure in United States history up until the crisis precipitated even larger failures, and the second largest failure of a regulated thrift. IndyMac Bank's parent corporation was IndyMac Bancorp until the FDIC seized IndyMac Bank. IndyMac Bancorp filed for Chapter 7 bankruptcy in July 2008.

Which financial institution was the first one visible to run into trouble in the United States?

IndyMac

Who was Southern California-based IndyMac a spin-off of?

Countrywide Financial

Before its failure, which savings and loan association was the seventh largest mortgage originator in the United States?

IndyMac Bank

On what date did IndyMac fail?

July 11, 2008

Who was IndyMac's parent corporation?

IndyMac Bancorp


IndyMac often made loans without verification of the borrower’s income or assets, and to borrowers with poor credit histories. Appraisals obtained by IndyMac on underlying collateral were often questionable as well. As an Alt-A lender, IndyMac’s business model was to offer loan products to fit the borrower’s needs, using an extensive array of risky option-adjustable-rate-mortgages (option ARMs), subprime loans, 80/20 loans, and other nontraditional products. Ultimately, loans were made to many borrowers who simply could not afford to make their payments. The thrift remained profitable only as long as it was able to sell those loans in the secondary mortgage market. IndyMac resisted efforts to regulate its involvement in those loans or tighten their issuing criteria: see the comment by Ruthann Melbourne, Chief Risk Officer, to the regulating agencies.

IndyMac often made loans without verifying what?

the borrower’s income

What was questionable on IndyMac's underlying collateral?

Appraisals

IndyMac gave loans to borrower's with what type credit histories?

poor

IndyMac offered this type of questionable loans to borrowers?

risky

IndyMac resisted efforts by regulators to tighten this criteria of their loans?

issuing criteria


IndyMac reported that during April 2008, Moody's and Standard & Poor's downgraded the ratings on a significant number of Mortgage-backed security (MBS) bonds including $160 million of those issued by IndyMac and which the bank retained in its MBS portfolio. IndyMac concluded that these downgrades would have negatively impacted the Company's risk-based capital ratio as of June 30, 2008. Had these lowered ratings been in effect at March 31, 2008, IndyMac concluded that the bank's capital ratio would have been 9.27% total risk-based. IndyMac warned that if its regulators found its capital position to have fallen below "well capitalized" (minimum 10% risk-based capital ratio) to "adequately capitalized" (8–10% risk-based capital ratio) the bank might no longer be able to use brokered deposits as a source of funds.

When did Moody's and Standard & Poor downgrade a significant number of IndyMac's MBS bonds?

April 2008

What was the value of IndyMac's MBS bonds retained in its MBS portfolio that were downgraded in April 2008?

$160 million

What was one of the agencies that downgraded a significant number of IndyMac's MBS bonds in April 2008?

Moody's

If IndyMac's downgraded MBS bond ratings had been in effect at March 31, 2008, what would the bank's capital ratio have been?

What is a well capitalized ratio?

minimum 10% risk-based


Senator Charles Schumer (D-NY) would later point out that brokered deposits made up more than 37 percent of IndyMac's total deposits and ask the Federal Deposit Insurance Corporation (FDIC) whether it had considered ordering IndyMac to reduce its reliance on these deposits. With $18.9 billion in total deposits reported on March 31, Senator Schumer would have been referring to a little over $7 billion in brokered deposits. While the breakout of maturities of these deposits is not known exactly, a simple averaging would have put the threat of brokered deposits loss to IndyMac at $500 million a month, had the regulator disallowed IndyMac from acquiring new brokered deposits on June 30.

Who is the Senator that asked FDIC if it had considered ordering IndyMac to reduce its reliance on brokered deposits?

Charles Schumer (D-NY)

What does the abbreviation FDIC stand for?

Federal Deposit Insurance Corporation

How much of IndyMac's total deposits of $18.9 billion on March 31, 2008 were considered brokered deposits?

a little over $7 billion

Had the FDIC disallowed IndyMac from acquiring new brokered deposits on this date, the threat of brokered deposit losses would have been $500 million a month?

June 30

How much was the threat of brokered deposit losses per month to IndyMac?

$500 million


When home prices declined in the latter half of 2007 and the secondary mortgage market collapsed, IndyMac was forced to hold $10.7 billion of loans it could not sell in the secondary market. Its reduced liquidity was further exacerbated in late June 2008 when account holders withdrew $1.55 billion or about 7.5% of IndyMac's deposits. This “run” on the thrift followed the public release of a letter from Senator Charles Schumer to the FDIC and OTS. The letter outlined the Senator’s concerns with IndyMac. While the run was a contributing factor in the timing of IndyMac’s demise, the underlying cause of the failure was the unsafe and unsound manner in which the thrift was operated.

What was the value of loans IndyMac was forced to hold when the secondary mortgage market collapsed in late 2007?

$10.7 billion

How much in deposits did account holders withdraw from IndyMac in late June 2008?

$1.55 billion

What percent of IndyMac's deposits were withdrawn by account holders in late June 2008?

Who is the Senator that released a letter to the FDIC and OTS that prompted a "run" on IndyMac?

Charles Schumer

What was the underlying cause of the failure on IndyMac?

unsafe and unsound manner in which the thrift was operated


On July 11, 2008, citing liquidity concerns, the FDIC put IndyMac Bank into conservatorship. A bridge bank, IndyMac Federal Bank, FSB, was established to assume control of IndyMac Bank's assets, its secured liabilities, and its insured deposit accounts. The FDIC announced plans to open IndyMac Federal Bank, FSB on July 14, 2008. Until then, depositors would have access their insured deposits through ATMs, their existing checks, and their existing debit cards. Telephone and Internet account access was restored when the bank reopened. The FDIC guarantees the funds of all insured accounts up to US$100,000, and has declared a special advance dividend to the roughly 10,000 depositors with funds in excess of the insured amount, guaranteeing 50% of any amounts in excess of $100,000. Yet, even with the pending sale of Indymac to IMB Management Holdings, an estimated 10,000 uninsured depositors of Indymac are still at a loss of over $270 million.

On what date did the FDIC put IndyMac Bank into conservatorship?

July 11, 2008

What was the name of the bridge bank established to assume control of IndyMac Bank's assets, liabilities and deposit accounts?

IndyMac Federal Bank, FSB

On what date did the FDIC plan to open IndyMac Federal Bank, FSB?

July 14, 2008

What is the maximum amount of funds the FDIC guarantees in insured accounts?

How many IndyMac account holders held funds in excess of the FDIC's insured amount of US$100,000?

roughly 10,000 depositors


Initially the companies affected were those directly involved in home construction and mortgage lending such as Northern Rock and Countrywide Financial, as they could no longer obtain financing through the credit markets. Over 100 mortgage lenders went bankrupt during 2007 and 2008. Concerns that investment bank Bear Stearns would collapse in March 2008 resulted in its fire-sale to JP Morgan Chase. The financial institution crisis hit its peak in September and October 2008. Several major institutions either failed, were acquired under duress, or were subject to government takeover. These included Lehman Brothers, Merrill Lynch, Fannie Mae, Freddie Mac, Washington Mutual, Wachovia, Citigroup, and AIG. On Oct. 6, 2008, three weeks after Lehman Brothers filed the largest bankruptcy in U.S. history, Lehman's former CEO found himself before Representative Henry A. Waxman, the California Democrat who chaired the House Committee on Oversight and Government Reform. Fuld said he was a victim of the collapse, blaming a "crisis of confidence" in the markets for dooming his firm.

How many mortgage lenders went bankrupt during 2007 and 2008?

Over 100

Who is the investment bank that was feared to collapse in March 2008 and was sold in a fire-sale to JP Morgan Chase?

Bear Stearns

When did the financial institution crisis hit its peak?

September and October 2008

When did Lehman's former CEO appear before Representative Henry A. Waxman?

Oct. 6, 2008

What firm filed the largest bankruptcy in U.S. history?

Lehman Brothers


In September 2008, the crisis hit its most critical stage. There was the equivalent of a bank run on the money market funds, which frequently invest in commercial paper issued by corporations to fund their operations and payrolls. Withdrawal from money markets were $144.5 billion during one week, versus $7.1 billion the week prior. This interrupted the ability of corporations to rollover (replace) their short-term debt. The U.S. government responded by extending insurance for money market accounts analogous to bank deposit insurance via a temporary guarantee and with Federal Reserve programs to purchase commercial paper. The TED spread, an indicator of perceived credit risk in the general economy, spiked up in July 2007, remained volatile for a year, then spiked even higher in September 2008, reaching a record 4.65% on October 10, 2008.

When did the financial crisis hit its most critical stage?

September 2008

The equivalent of a bank run on which funds occurred in September 2008?

money market funds

What do money market funds frequently invest in?

commercial paper issued by corporations

How much was withdrawn from money markets during one week in September 2008?

$144.5 billion

What was the record high for the TED spread on October 10, 2008?


Economist Paul Krugman and U.S. Treasury Secretary Timothy Geithner explain the credit crisis via the implosion of the shadow banking system, which had grown to nearly equal the importance of the traditional commercial banking sector as described above. Without the ability to obtain investor funds in exchange for most types of mortgage-backed securities or asset-backed commercial paper, investment banks and other entities in the shadow banking system could not provide funds to mortgage firms and other corporations.

Economist Paul Krugman explained the credit crisis via the implosion of which system?

shadow banking system

What is the system with nearly equal the importance of traditional commercial banking?

shadow banking system

The shadow banking system could not provide funds to mortgage firms and other corporations without the ability to obtain which funds?

investor funds

What was Timothy Geithner's position during the fall of 2008?

U.S. Treasury Secretary


This meant that nearly one-third of the U.S. lending mechanism was frozen and continued to be frozen into June 2009. According to the Brookings Institution, the traditional banking system does not have the capital to close this gap as of June 2009: "It would take a number of years of strong profits to generate sufficient capital to support that additional lending volume". The authors also indicate that some forms of securitization are "likely to vanish forever, having been an artifact of excessively loose credit conditions". While traditional banks have raised their lending standards, it was the collapse of the shadow banking system that is the primary cause of the reduction in funds available for borrowing.

How much of the U.S. lending mechanism was frozen until June 2009?

nearly one-third

What is the primary cause of the reduction in funds available for borrowing?

the collapse of the shadow banking system

What institution reported that the traditional banking systems does not have the capital to close the gap in the lending mechanism?

Brookings Institution

What is likely to vanish forever, as a result of excessively loose credit conditions?

some forms of securitization

As of June 2009, the Brookings Institution reports that traditional banking system does not have enough of what to close the lending gap?

capital


There is a direct relationship between declines in wealth and declines in consumption and business investment, which along with government spending, represent the economic engine. Between June 2007 and November 2008, Americans lost an estimated average of more than a quarter of their collective net worth.[citation needed] By early November 2008, a broad U.S. stock index the S&P 500, was down 45% from its 2007 high. Housing prices had dropped 20% from their 2006 peak, with futures markets signaling a 30–35% potential drop. Total home equity in the United States, which was valued at $13 trillion at its peak in 2006, had dropped to $8.8 trillion by mid-2008 and was still falling in late 2008. Total retirement assets, Americans' second-largest household asset, dropped by 22%, from $10.3 trillion in 2006 to $8 trillion in mid-2008. During the same period, savings and investment assets (apart from retirement savings) lost $1.2 trillion and pension assets lost $1.3 trillion. Taken together, these losses total a staggering $8.3 trillion. Since peaking in the second quarter of 2007, household wealth is down $14 trillion.

How much net worth did Americans lose between June 2007 and November 2008?

more than a quarter

In November 2008, how much was the U.S. stock index down from its 2007 high?

In November 2008, how much had housing prices drop from their 2006 peak?

How much was home equity valued in the United States at its peak in 2006?

$13 trillion

How much was home equity valued in the United States in mid-2008?

$8.8 trillion


In November 2008, economist Dean Baker observed: "There is a really good reason for tighter credit. Tens of millions of homeowners who had substantial equity in their homes two years ago have little or nothing today. Businesses are facing the worst downturn since the Great Depression. This matters for credit decisions. A homeowner with equity in her home is very unlikely to default on a car loan or credit card debt. They will draw on this equity rather than lose their car and/or have a default placed on their credit record. On the other hand, a homeowner who has no equity is a serious default risk. In the case of businesses, their creditworthiness depends on their future profits. Profit prospects look much worse in November 2008 than they did in November 2007... While many banks are obviously at the brink, consumers and businesses would be facing a much harder time getting credit right now even if the financial system were rock solid. The problem with the economy is the loss of close to $6 trillion in housing wealth and an even larger amount of stock wealth.

According to economist Dean Baker, a homeowner who has no equity if this type default risk?

serious

What is one of the major problems with the economy in November 2008?

loss of close to $6 trillion in housing wealth

How many homeowners who had substantial equity in their homes two years ago, have little no equity as of November 2008?

Tens of millions

What does the creditworthiness of businesses depend on?

future profits

How did profit prospects for businesses look in November 2008 compared to November 2007?

much worse


Several commentators have suggested that if the liquidity crisis continues, an extended recession or worse could occur. The continuing development of the crisis has prompted fears of a global economic collapse although there are now many cautiously optimistic forecasters in addition to some prominent sources who remain negative. The financial crisis is likely to yield the biggest banking shakeout since the savings-and-loan meltdown. Investment bank UBS stated on October 6 that 2008 would see a clear global recession, with recovery unlikely for at least two years. Three days later UBS economists announced that the "beginning of the end" of the crisis had begun, with the world starting to make the necessary actions to fix the crisis: capital injection by governments; injection made systemically; interest rate cuts to help borrowers. The United Kingdom had started systemic injection, and the world's central banks were now cutting interest rates. UBS emphasized the United States needed to implement systemic injection. UBS further emphasized that this fixes only the financial crisis, but that in economic terms "the worst is still to come". UBS quantified their expected recession durations on October 16: the Eurozone's would last two quarters, the United States' would last three quarters, and the United Kingdom's would last four quarters. The economic crisis in Iceland involved all three of the country's major banks. Relative to the size of its economy, Iceland’s banking collapse is the largest suffered by any country in economic history.

In 2008, what type collapse was feared?

global economic collapse

What investment bank stated on October 6 that 2008 would see a global recession lasting for at least two years?

UBS

On October 16, 2008, how long did UBS predict the United States' recession would last?

three quarters

Relative to the size of its economy, what country's banking collapse was the largest experienced by any country in economic history?

Iceland

What was one of the actions taken by government to fix the financial crisis?

capital injection


The Brookings Institution reported in June 2009 that U.S. consumption accounted for more than a third of the growth in global consumption between 2000 and 2007. "The US economy has been spending too much and borrowing too much for years and the rest of the world depended on the U.S. consumer as a source of global demand." With a recession in the U.S. and the increased savings rate of U.S. consumers, declines in growth elsewhere have been dramatic. For the first quarter of 2009, the annualized rate of decline in GDP was 14.4% in Germany, 15.2% in Japan, 7.4% in the UK, 18% in Latvia, 9.8% in the Euro area and 21.5% for Mexico.

According to The Brookings Institution report in June 2009, how much growth did U.S. consumption account for between 2000 and 2007?

more than a third

For the first quarter of 2009, what was the annualized rate of decline in GDP in Germany?

For the first quarter of 2009, what was the annualized rate of decline in GDP in Mexico?

Who depended on the U.S. consumer as a source of global demand?

the rest of the world

What is one reason for the decline in growth around the world in 2009?

recession in the U.S.


Some developing countries that had seen strong economic growth saw significant slowdowns. For example, growth forecasts in Cambodia show a fall from more than 10% in 2007 to close to zero in 2009, and Kenya may achieve only 3–4% growth in 2009, down from 7% in 2007. According to the research by the Overseas Development Institute, reductions in growth can be attributed to falls in trade, commodity prices, investment and remittances sent from migrant workers (which reached a record $251 billion in 2007, but have fallen in many countries since). This has stark implications and has led to a dramatic rise in the number of households living below the poverty line, be it 300,000 in Bangladesh or 230,000 in Ghana. Especially states with a fragile political system have to fear that investors from Western states withdraw their money because of the crisis. Bruno Wenn of the German DEG recommends to provide a sound economic policymaking and good governance to attract new investors

What is the growth forecast for Cambodia in 2009?

close to zero

How much were remittances sent from migrant workers in 2007?

$251 billion

How many people live below the poverty line in Bangladesh?

What does Bruno Wenn of the German DEG recommend to attract new investors?

sound economic policymaking and good governance

According to Overseas Development Institute, what is one reason for the reduction in growth in developing countries?

falls in trade


The World Bank reported in February 2009 that the Arab World was far less severely affected by the credit crunch. With generally good balance of payments positions coming into the crisis or with alternative sources of financing for their large current account deficits, such as remittances, Foreign Direct Investment (FDI) or foreign aid, Arab countries were able to avoid going to the market in the latter part of 2008. This group is in the best position to absorb the economic shocks. They entered the crisis in exceptionally strong positions. This gives them a significant cushion against the global downturn. The greatest impact of the global economic crisis will come in the form of lower oil prices, which remains the single most important determinant of economic performance. Steadily declining oil prices would force them to draw down reserves and cut down on investments. Significantly lower oil prices could cause a reversal of economic performance as has been the case in past oil shocks. Initial impact will be seen on public finances and employment for foreign workers.

What area of the world was less severely affected by the credit crunch according to The World Bank report In February 2009?

Arab World

What does the abbreviation FDI stand for?

Foreign Direct Investment

Arab countries entered the financial crisis in exceptionally strong positions giving them a cushion against this?

global downturn

What will have the greatest impact on the global economic crisis?

lower oil prices

What is the single most important determinant of economic performance?

oil prices


The output of goods and services produced by labor and property located in the United States—decreased at an annual rate of approximately 6% in the fourth quarter of 2008 and first quarter of 2009, versus activity in the year-ago periods. The U.S. unemployment rate increased to 10.1% by October 2009, the highest rate since 1983 and roughly twice the pre-crisis rate. The average hours per work week declined to 33, the lowest level since the government began collecting the data in 1964. With the decline of gross domestic product came the decline in innovation. With fewer resources to risk in creative destruction, the number of patent applications flat-lined. Compared to the previous 5 years of exponential increases in patent application, this stagnation correlates to the similar drop in GDP during the same time period.

What was the annual rate of decrease for the output of goods and services produced by labor and property in 4Q 2008 and 1Q 2009?

What was the U.S. unemployment rate in October 2009?

The U.E. employment rate was 10.2% in October 2009, which was the highest rate since what year?

What was the average hours per work week in October 2009?

The decline of gross domestic product also caused a decline in innovation, evidenced by the flat-lining of what?

patent applications


Typical American families did not fare as well, nor did those "wealthy-but-not wealthiest" families just beneath the pyramid's top. On the other hand, half of the poorest families did not have wealth declines at all during the crisis. The Federal Reserve surveyed 4,000 households between 2007 and 2009, and found that the total wealth of 63 percent of all Americans declined in that period. 77 percent of the richest families had a decrease in total wealth, while only 50 percent of those on the bottom of the pyramid suffered a decrease.

How many of the poorest families did not have any wealth decline during the financial crisis?

half

In a Federal Reserve survey of 4,000 households, what percent reported wealth decline between 2007 and 2009?

How many of the richest families had a decrease in total wealth between 2007 and 2009?

How many families at the bottom of the pyramid had a decrease in total wealth between 2007 and 2009?

Which families experienced the least decline in wealth between 2007 and 2009?

poorest families


On November 3, 2008, the European Commission at Brussels predicted for 2009 an extremely weak growth of GDP, by 0.1%, for the countries of the Eurozone (France, Germany, Italy, Belgium etc.) and even negative number for the UK (−1.0%), Ireland and Spain. On November 6, the IMF at Washington, D.C., launched numbers predicting a worldwide recession by −0.3% for 2009, averaged over the developed economies. On the same day, the Bank of England and the European Central Bank, respectively, reduced their interest rates from 4.5% down to 3%, and from 3.75% down to 3.25%. As a consequence, starting from November 2008, several countries launched large "help packages" for their economies.

On November 3, 2008, who predicted extremely weak GDP growth for the Eurozone in 2009?

European Commission at Brussels

How much did the European Commission estimate the GDP growth for Eurozone countries would be in 2009?

How much did the European Commission estimate the GDP growth for the UK would be in 2009?

On November 6, in Washington, D.C., who predicted a worldwide recession for 2009?

the IMF

On November 5, 2008, the Bank of England reduced their interest rate from 4.5% to what?


The U.S. Federal Reserve and central banks around the world have taken steps to expand money supplies to avoid the risk of a deflationary spiral, in which lower wages and higher unemployment lead to a self-reinforcing decline in global consumption. In addition, governments have enacted large fiscal stimulus packages, by borrowing and spending to offset the reduction in private sector demand caused by the crisis. The U.S. Federal Reserve's new and expanded liquidity facilities were intended to enable the central bank to fulfill its traditional lender-of-last-resort role during the crisis while mitigating stigma, broadening the set of institutions with access to liquidity, and increasing the flexibility with which institutions could tap such liquidity.

What have central banks around the world done to avoid the risk of a deflationary spiral?

expand money supplies

What have governments done to offset the reduction in private sector demand?

enacted large fiscal stimulus packages

What is the U.S. Federal Reserve's traditional role during a crisis?

lender-of-last-resort

What did the U.S. Federal Reserve do to increase access to liquidity?

expanded liquidity facilities

What type decline does lower wages and higher unemployment lead to?

self-reinforcing decline


This credit freeze brought the global financial system to the brink of collapse. The response of the Federal Reserve, the European Central Bank, the Bank of England and other central banks was immediate and dramatic. During the last quarter of 2008, these central banks purchased US$2.5 trillion of government debt and troubled private assets from banks. This was the largest liquidity injection into the credit market, and the largest monetary policy action, in world history. Following a model initiated by the United Kingdom bank rescue package, the governments of European nations and the USA guaranteed the debt issued by their banks and raised the capital of their national banking systems, ultimately purchasing $1.5 trillion newly issued preferred stock in their major banks. In October 2010, Nobel laureate Joseph Stiglitz explained how the U.S. Federal Reserve was implementing another monetary policy —creating currency— as a method to combat the liquidity trap. By creating $600 billion and inserting[clarification needed] this directly into banks, the Federal Reserve intended to spur banks to finance more domestic loans and refinance mortgages. However, banks instead were spending the money in more profitable areas by investing internationally in emerging markets. Banks were also investing in foreign currencies, which Stiglitz and others point out may lead to currency wars while China redirects its currency holdings away from the United States.

What brought the global financial system to the brink of collapse?

credit freeze

How much government debt and troubled private assets did central banks purchase during the last quarter of 2008?

US$2.5 trillion

How much preferred stock did governments of European nations and the USA purchase in their major banks?

$1.5 trillion

In October 2010, who was the Nobel laureate that explained how the U.S. Federal Reserve was creating currency to combat the liquidity trap?

Joseph Stiglitz

What did the banks chose to do with the money created by the Federal Reserve instead of financing more domestic loans and refinancing mortgages?

investing internationally in emerging markets


United States President Barack Obama and key advisers introduced a series of regulatory proposals in June 2009. The proposals address consumer protection, executive pay, bank financial cushions or capital requirements, expanded regulation of the shadow banking system and derivatives, and enhanced authority for the Federal Reserve to safely wind-down systemically important institutions, among others. In January 2010, Obama proposed additional regulations limiting the ability of banks to engage in proprietary trading. The proposals were dubbed "The Volcker Rule", in recognition of Paul Volcker, who has publicly argued for the proposed changes.

What was introduced by President Barack Obama in June 2009?

a series of regulatory proposals

What was one of the items important to consumers that was addressed by the new regulatory proposals introduced in June 2009?

consumer protection

Regulations were proposed by Obama in January 2010 to limit the ability of banks to engage in which type trading?

proprietary

Who were proposed new regulations called "The Volcker Rule" named after?

Paul Volcker

Who publicly argued for changes limiting the ability of banks to engage in proprietary trading?

Paul Volcker


The U.S. Senate passed a reform bill in May 2010, following the House which passed a bill in December 2009. These bills must now be reconciled. The New York Times provided a comparative summary of the features of the two bills, which address to varying extent the principles enumerated by the Obama administration. For instance, the Volcker Rule against proprietary trading is not part of the legislation, though in the Senate bill regulators have the discretion but not the obligation to prohibit these trades.

When did the U.S. Senate first pass a financial reform bill?

May 2010

When did the U.S. House first pass a financial reform bill?

December 2009

What rule against proprietary trading was not part of legislation passed by either the Senate or House?

Volcker Rule

Which bill gave regulators the discretion to prohibit proprietary trades?

Senate


European regulators introduced Basel III regulations for banks. It increased capital ratios, limits on leverage, narrow definition of capital (to exclude subordinated debt), limit counter-party risk, and new liquidity requirements. Critics argue that Basel III doesn’t address the problem of faulty risk-weightings. Major banks suffered losses from AAA-rated created by financial engineering (which creates apparently risk-free assets out of high risk collateral) that required less capital according to Basel II. Lending to AA-rated sovereigns has a risk-weight of zero, thus increasing lending to governments and leading to the next crisis. Johan Norberg argues that regulations (Basel III among others) have indeed led to excessive lending to risky governments (see European sovereign-debt crisis) and the ECB pursues even more lending as the solution.

What did European regulators introduce to increase the oversight of banks?

Basel III regulations

Critics argue that Basel III doesn't address which problem?

faulty risk-weightings

Who argued that regulations led to excessive lending to risky governments?

Johan Norberg

What was increased by Basel III regulations?

capital ratios

What term describes creating risk-free assets out of high risk collateral?

financial engineering


The U.S. recession that began in December 2007 ended in June 2009, according to the U.S. National Bureau of Economic Research (NBER) and the financial crisis appears to have ended about the same time. In April 2009 TIME magazine declared "More Quickly Than It Began, The Banking Crisis Is Over." The United States Financial Crisis Inquiry Commission dates the crisis to 2008. President Barack Obama declared on January 27, 2010, "the markets are now stabilized, and we've recovered most of the money we spent on the banks."

When did the U.S. recession that began in December 2007 end?

June 2009

When did the financial crisis appear to have ended?

June 2009

What was the name of the article that appeared in TIME magazine in April 2009 declaring the crisis over?

More Quickly Than It Began, The Banking Crisis Is Over."

On what date did President Barack Obama declare that the markets are stabilized?

January 27, 2010

When does the United States Financial Crisis Inquiry Commission date the crisis to?


Advanced economies led global economic growth prior to the financial crisis with "emerging" and "developing" economies lagging behind. The crisis completely overturned this relationship. The International Monetary Fund found that "advanced" economies accounted for only 31% of global GDP while emerging and developing economies accounted for 69% of global GDP from 2007 to 2014. In the tables, the names of emergent economies are shown in boldface type, while the names of developed economies are in Roman (regular) type.

Who led global economic growth after the financial crisis?

"emerging" and "developing" economies

How much global GDP did emerging and developing economies account for from 2007 to 2014?

How much global GDP did "advanced" economies account for from 2007 to 2014?

What economies led global economic growth prior to the financial crisis?

Advanced economies

What relationship between advanced and emerging/developing was completely overturned by the financial crisis of 2007?

global economic growth


Portugal (Portuguese: [puɾtuˈɣaɫ]), officially the Portuguese Republic (Portuguese: República Portuguesa), is a country on the Iberian Peninsula, in Southwestern Europe. It is the westernmost country of mainland Europe, being bordered by the Atlantic Ocean to the west and south and by Spain to the north and east. The Portugal–Spain border is 1,214 km (754 mi) long and considered the longest uninterrupted border within the European Union. The republic also includes the Atlantic archipelagos of the Azores and Madeira, both autonomous regions with their own regional governments.

What ocean does Portugal border?

Atlantic Ocean

What other country does Portugal border?

Spain

What is the longest uninterrupted border within the European Union?

Portugal–Spain

Where is Portugal located?

Iberian Peninsula, in Southwestern Europe

How long is the Portugal-Spain border?

1,214 km (754 mi)

What two autonomous regions have their own governments in Portugal?

Azores and Madeira


The land within the borders of current Portugal has been continuously settled and fought over since prehistoric times. The Celts and the Romans were followed by the Visigothic and the Suebi Germanic peoples, who were themselves later invaded by the Moors. These Muslim peoples were eventually expelled during the Christian Reconquista of the peninsula. By 1139, Portugal had established itself as a kingdom independent from León. In the 15th and 16th centuries, as the result of pioneering the Age of Discovery, Portugal expanded Western influence and established the first global empire, becoming one of the world's major economic, political and military powers.

Who were the first inhabitants of Portugal?

The Celts and the Romans

Which two groups followed the first inhabitants?

Visigothic and the Suebi Germanic peoples

By what year had Portugal established itself as an independent kingdom?

What age did Portugal pioneer?

Age of Discovery

In which centuries did Portugal establish the first global empire?

15th and 16th centuries


Portugal lost much of its wealth and status with the destruction of Lisbon in a 1755 earthquake, occupation during the Napoleonic Wars, and the independence of Brazil, its wealthiest colony, in 1822. After the 1910 revolution deposed the monarchy, the democratic but unstable Portuguese First Republic was established, later being superseded by the "Estado Novo" right-wing authoritarian regime. Democracy was restored after the Portuguese Colonial War and the Carnation Revolution in 1974. Shortly after, independence was granted to all its colonies, with the exception of Macau, which was handed over to China in 1999. This marked the end of the longest-lived European colonial empire, leaving a profound cultural and architectural influence across the globe and a legacy of over 250 million Portuguese speakers today.

In Portugal, which city was destroyed in the 1755 earthquake?

Lisbon

In which year did Brazel become independent?

In which year was the Portugal monarchy deposed?

Which Portugese colony was lost to China in 1999?

Macau

How many Portugese speakers are there today?

250 million


Portugal maintains a unitary semi-presidential republican form of government and is a developed country with an advanced economy, and a high living standard, having the 18th highest Social Progress in the world, putting it ahead of other Western European countries like France, Spain and Italy. It is a member of numerous international organizations, including the United Nations, the European Union, the Eurozone, OECD, NATO and the Community of Portuguese Language Countries. Portugal is also known for having decriminalized the usage of all common drugs in 2001, the first country in the world to do so. However, drugs are still illegal in Portugal.

What form of government does Portugal maintain?

unitary semi-presidential republican

What is Portugal's Social Progress ranking?

18th highest

Which three Western European countries have a lower Social Progress ranking than Portugal?

France, Spain and Italy

What are three international organizations that Portugal belongs to?

United Nations, the European Union, the Eurozone, OECD, NATO and the Community of Portuguese Language Countries

In 2001, Portugal was the first country in the world to do what?

decriminalized the usage of all common drugs


The early history of Portugal is shared with the rest of the Iberian Peninsula located in South Western Europe. The name of Portugal derives from the joined Romano-Celtic name Portus Cale. The region was settled by Pre-Celts and Celts, giving origin to peoples like the Gallaeci, Lusitanians, Celtici and Cynetes, visited by Phoenicians and Carthaginians, incorporated in the Roman Republic dominions as Lusitania and part of Gallaecia, after 45 BC until 298 AD, settled again by Suebi, Buri, and Visigoths, and conquered by Moors. Other influences include some 5th-century vestiges of Alan settlement, which were found in Alenquer (old Germanic Alankerk, from Alan+kerk; meaning church of the Alan (people), Coimbra and Lisbon.

From what name is Portugal derived?

Portus Cale

By what group was the Portugal region settled?

Pre-Celts and Celts

To what four peoples did the settlement of Portugal give rise?

Gallaeci, Lusitanians, Celtici and Cynetes

During what years was the Portugal region incorporated in the Roman Republic?

45 BC until 298 AD

From what old Germanic word is Alenquer originate?

Alankerk


In 27 BC, Lusitania gained the status of Roman province. Later, a northern province of Lusitania was formed, known as Gallaecia, with capital in Bracara Augusta, today's Braga. There are still many ruins of castros (hill forts) all over modern Portugal and remains of Castro culture. Numerous Roman sites are scattered around present-day Portugal, some urban remains are quite large, like Conímbriga and Mirobriga. The former, beyond being one of the largest Roman settlements in Portugal, is also classified as a National Monument. Conímbriga lies 16 km from Coimbra which by its turn was the ancient Aeminium). The site also has a museum that displays objects found by archaeologists during their excavations.

In what year did Lusitania become a Roman province?

27 BC

What was the Northern province of Lusitania known as?

Gallaecia

What are castros?

hill forts

What are two large Roman sites that still exist today in Portugal?

Conímbriga and Mirobriga

How far apart are Conimbriga and Coimbra?

16 km


After defeating the Visigoths in only a few months, the Umayyad Caliphate started expanding rapidly in the peninsula. Beginning in 711, the land that is now Portugal became part of the vast Umayyad Caliphate's empire of Damascus, which stretched from the Indus river in the Indian sub-continent (now Pakistan) up to the South of France, until its collapse in 750. That year the west of the empire gained its independence under Abd-ar-Rahman I with the establishment of the Emirate of Córdoba. After almost two centuries, the Emirate became the Caliphate of Córdoba in 929, until its dissolution a century later in 1031 into no less than 23 small kingdoms, called Taifa kingdoms.

How long did it take the Umayyad Caliphate to defeat the Visigoths?

a few months

In what year did Portugal become a part of Umayyad Caliphate's empire?

In which year did Umayyad Caliphate's empire collapse?

Under whom did the Western part of Umayyad Caliphate's empire gain its independence?

Abd-ar-Rahman

How long did it take the Emirate to become the Caliphate of Codoba?

almost two centuries


The governors of the taifas each proclaimed themselves Emir of their provinces and established diplomatic relations with the Christian kingdoms of the north. Most of Portugal fell into the hands of the Taifa of Badajoz of the Aftasid Dynasty, and after a short spell of an ephemeral Taifa of Lisbon in 1022, fell under the dominion of the Taifa of Seville of the Abbadids poets. The Taifa period ended with the conquest of the Almoravids who came from Morocco in 1086 winning a decisive victory at the Battle of Sagrajas, followed a century later in 1147, after the second period of Taifa, by the Almohads, also from Marrakesh.

What were the governors of the taifas called?

Emir

Which which kingdoms did the taifas establish diplomatic relations?

the Christian kingdoms of the north

To which taifa did most of Portugal fall into?

Taifa of Badajoz

In which year did the taifa period end?

Which battle took place in 1147?

Battle of Sagrajas


The Muslim population of the region consisted mainly of native Iberian converts to Islam (the so-called Muwallad or Muladi) and to a lesser extent Berbers and Arabs. The Arabs were principally noblemen from Oman; and though few in numbers, they constituted the elite of the population. The Berbers were originally from the Atlas mountains and Rif mountains of North Africa and were essentially nomads. In Portugal, the Muslim population (or "Moors"), relatively small in numbers, stayed in the Algarve region, and south of the Tagus. Today, there are approximately 800 words in the Portuguese language of Arabic origin. The Muslims were expelled from Portugal 300 years earlier than in neighbouring Spain, which is reflected both in Portuguese culture and the language, which is mostly Celtiberian and Vulgar Latin.

What are converts to Islam called?

Muwallad or Muladi

Who did the Arabs principally consist of?

noblemen from Oman

Where were the Berbers originally from?

Atlas mountains and Rif mountains of North Africa

In which region of Portugal did the Muslim population stay?

Algarve region, and south of the Tagus

How many modern Portugese words have Arabic origins?


Pelayos' plan was to use the Cantabrian mountains as a place of refuge and protection from the invading Moors. He then aimed to regroup the Iberian Peninsula's Christian armies and use the Cantabrian mountains as a springboard from which to regain their lands from the Moors. In the process, after defeating the Moors in the Battle of Covadonga in 722 AD, Pelayos was proclaimed king, thus founding the Christian Kingdom of Asturias and starting the war of Christian reconquest known in Portuguese as the Reconquista Cristã.

What was Pelayos' plan?

to use the Cantabrian mountains as a place of refuge and protection from the invading Moors

Against which group of people was Pelayos fighting?

Moors

In which battle did Pelayos defeat the Moors?

Battle of Covadonga

In which year was Pelayos proclaimed king?

722 AD

What was the war of Christian reconquest, started by Pelayos, known as in Portugese?

Reconquista Cristã


After annexing the County of Portugal into one of the several counties that made up the Kingdom of Asturias, King Alfonso III of Asturias knighted Vimara Peres, in 868 AD, as the First Count of Portus Cale (Portugal). The region became known as Portucale, Portugale, and simultaneously Portugália — the County of Portugal. Later the Kingdom of Asturias was divided into a number of Christian Kingdoms in Northern Spain due to dynastic divisions of inheritance among the kings offspring. With the forced abdication of Alfonso III "the Great" of Asturias by his sons in 910, the Kingdom of Asturias split into three separate kingdoms of León, Galicia and Asturias. The three kingdoms were eventually reunited in 924 (León and Galicia in 914, Asturias later) under the crown of León.

Who annexed the County of Portugal into the Kingdom of Asturias?

King Alfonso III

In which year was Vimara Peres knighted?

868 AD

What was Vimara knighted as?

First Count of Portus Cale

What three names did Portugal become known as after Vimara Peres was knighted?

Portucale, Portugale, and simultaneously Portugália

Why was the Kingdom of Asturias divided?

dynastic divisions of inheritance among the kings offspring


A year before Alfonso III "the Great" of Asturias death, three of Alfonso's sons rose in rebellion and forced him to abdicate, partitioning the kingdom among them. The eldest son, García, became king of León. The second son, Ordoño, reigned in Galicia, while the third, Fruela, received Asturias with Oviedo as his capital. Alfonso died in Zamora, probably in 910. His former realm would be reunited when first García died childless and León passed to Ordoño. He in turn died when his children were too young to ascend; Fruela became king of a reunited crown. His death the next year initiated a series of internecine struggles that led to unstable succession for over a century. It continued under that name[clarification needed] until incorporated into the Kingdom of Castile in 1230, after Ferdinand III became joint king of the two kingdoms. This was done to avoid dynastic feuds and to maintain the Christian Kingdoms strong enough to prevent complete Muslim take over of the Iberian Peninsula and to further the Reconquista of Iberia by Christian armies.

Who was the eldest son of Alfonso III and what did he become king of?

García, became king of León

Who was the second son of Alfonso III and what did he become king of?

Ordoño, reigned in Galicia

Who was Alfonso III's third son and what area did he receive?

Fruela, received Asturias with Oviedo as his capital

In which year did Alfonso III likely die?

In which year was the Kingdom of Castile formed?


During the century of internecine struggles for dominance among the Northern Christians kingdoms, the County of Portugal, formed the southern portion of the Kingdom of Galicia. At times the Kingdom of Galicia existed independently for short periods, but usually formed an important part of the Kingdom of Leon. Throughout this period, the people of County of Portugal as Galicians found themselves struggling to maintain the autonomy of Galicia with its distinct language and culture (Galician-Portuguese) from the Leonese culture, whenever the status of the Kingdom of Galicia changed in relation to the Kingdom of Leon. As a result of political division, Galician-Portuguese lost its unity when the County of Portugal separated from the Kingdom of Galicia (a dependent kingdom of Leon) to establish the Kingdom of Portugal. The Galician and Portuguese versions of the language then diverged over time as they followed independent evolutionary paths. This began occurring when the Kingdom of Leon and the Kingdom of Castile united and the Castilian Language (known as Spanish) slowly over the centuries began influencing the Galician Language and then trying to replace it. The same thing happened to Astur-Leonese Language to the point where it is greatly reduced or completely replaced by the Castilian (Spanish Language).

During the internecine struggles, what did the the people of Country of Portugal struggle with?

maintain the autonomy of Galicia with its distinct language and culture (Galician-Portuguese) from the Leonese culture

The County of Portugal separated from the Kingdom of Galicia to establish what?

the Kingdom of Portugal

Portugese diverged from which language?

Galician

What is the Castilian Lanugage known as?

Spanish

By which language was the Astur-Leonese replaced?

Castilian (Spanish Language)


In 1348 and 1349 Portugal, like the rest of Europe, was devastated by the Black Death. In 1373, Portugal made an alliance with England, which is the longest-standing alliance in the world. This alliance served both nations' interests throughout history and is regarded by many as the predecessor to NATO. Over time this went way beyond geo-political and military cooperation (protecting both nations' interests in Africa, the Americas and Asia against French, Spanish and Dutch rivals) and maintained strong trade and cultural ties between the two old European allies. Particularly in the Oporto region, there is visible English influence to this day.

Which years were plagued by the Black Death?

1348 and 1349

In 1373, Portugal made an alliance with which country?

England

What is the longest standing alliance in the world?

Portugal made an alliance with England

The Portugal-English alliance served as the predecessor to what?

NATO

In which Portugese region is there still visible English influence?

Oporto region


Portugal spearheaded European exploration of the world and the Age of Discovery. Prince Henry the Navigator, son of King João I, became the main sponsor and patron of this endeavour. During this period, Portugal explored the Atlantic Ocean, discovering several Atlantic archipelagos like the Azores, Madeira, and Cape Verde, explored the African coast, colonized selected areas of Africa, discovered an eastern route to India via the Cape of Good Hope, discovered Brazil, explored the Indian Ocean, established trading routes throughout most of southern Asia, and sent the first direct European maritime trade and diplomatic missions to China and Japan.

What European age did Portugal spearhead?

the Age of Discovery

Who was the Father of Prince Henry the Navigator?

King João I

Which three Atlantic archipelagos did Portugal discover?

Azores, Madeira, and Cape Verde

By which path did Portugal discover a route to India?

Cape of Good Hope

What South American country did Portugal discover?

Brazil


In 1738, Sebastião José de Carvalho e Melo, 1st Marquis of Pombal, began a diplomatic career as the Portuguese Ambassador in London and later in Vienna. The Queen consort of Portugal, Archduchess Maria Anne Josefa of Austria, was fond of Melo; and after his first wife died, she arranged the widowed de Melo's second marriage to the daughter of the Austrian Field Marshal Leopold Josef, Count von Daun. King John V of Portugal, however, was not pleased and recalled Melo to Portugal in 1749. John V died the following year and his son, Joseph I of Portugal, was crowned. In contrast to his father, Joseph I was fond of de Melo, and with the Queen Mother's approval, he appointed Melo as Minister of Foreign Affairs.

Who was the 1st Marquis of Pombal?

Sebastião José de Carvalho e Melo

What title did Archduchess Maria Anne Josefa hold?

Queen consort of Portugal

Who arranged the widow de Melo's second marriage?

Queen consort of Portugal

Who was de Melo's second marriage to?

the daughter of the Austrian Field Marshal Leopold Josef, Count von Daun

Who was not pleased by de Melo's second marriage?

King John V of Portugal


As the King's confidence in de Melo increased, the King entrusted him with more control of the state. By 1755, Sebastião de Melo was made Prime Minister. Impressed by British economic success that he had witnessed from the Ambassador, he successfully implemented similar economic policies in Portugal. He abolished slavery in Portugal and in the Portuguese colonies in India; reorganized the army and the navy; restructured the University of Coimbra, and ended discrimination against different Christian sects in Portugal.

Did the King's confidence in de Melo increase or decrease?

increased

What title was given to de Melo in 1755?

Prime Minister

With whose economic success was de Melo impressed with?

British

Who abolished slavery in Portugal?

Sebastião de Melo

Who ended discrimination against difference Christian sects in Portugal?

Sebastião de Melo


But Sebastião de Melo's greatest reforms were economic and financial, with the creation of several companies and guilds to regulate every commercial activity. He demarcated the region for production of Port to ensure the wine's quality, and this was the first attempt to control wine quality and production in Europe. He ruled with a strong hand by imposing strict law upon all classes of Portuguese society from the high nobility to the poorest working class, along with a widespread review of the country's tax system. These reforms gained him enemies in the upper classes, especially among the high nobility, who despised him as a social upstart.

What were de Melo's greatest reforms?

economic and financial

Why did e Melo demarcate the region for production of Port?

to ensure the wine's quality

Did de Melo impose strict laws only on one class of people?

upon all classes of Portuguese society from the high nobility to the poorest working class

Among which class did de Melo's reforms gain him the most enemies?

especially among the high nobility

Who was the first person to try to ensure the wine's quality in Portugal?

Sebastião de Melo


Despite the calamity and huge death toll, Lisbon suffered no epidemics and within less than one year was already being rebuilt. The new city centre of Lisbon was designed to resist subsequent earthquakes. Architectural models were built for tests, and the effects of an earthquake were simulated by marching troops around the models. The buildings and big squares of the Pombaline City Centre still remain as one of Lisbon's tourist attractions. Sebastião de Melo also made an important contribution to the study of seismology by designing an inquiry that was sent to every parish in the country.

What type of natural disaster was the city center of Lisbon designed to resist?

earthquakes

How were earthquakes simulated on the architectural models?

marching troops around the models

What are some of Lisbon's tourist attractions?

The buildings and big squares of the Pombaline City Centre

How did de Melo contribute to the study of seismology?

by designing an inquiry that was sent to every parish in the country

Did Lisbon suffer any epidemics from the calamity?

Lisbon suffered no epidemics


Following the earthquake, Joseph I gave his Prime Minister even more power, and Sebastião de Melo became a powerful, progressive dictator. As his power grew, his enemies increased in number, and bitter disputes with the high nobility became frequent. In 1758 Joseph I was wounded in an attempted assassination. The Távora family and the Duke of Aveiro were implicated and executed after a quick trial. The Jesuits were expelled from the country and their assets confiscated by the crown. Sebastião de Melo prosecuted every person involved, even women and children. This was the final stroke that broke the power of the aristocracy. Joseph I made his loyal minister Count of Oeiras in 1759.

What happened to Joseph I in 1758?

wounded in an attempted assassination

Who was implicated in the attempted assassination of Joseph I?

The Távora family and the Duke of Aveiro

Who was expelled from the country after the assassination attempt on Joseph I?

The Jesuits

What act finally broke the power of the aristocracy?

Sebastião de Melo prosecuted every person involved, even women and children

In what year did Joseph I make his minister the Count of Oeiras?


Following the Távora affair, the new Count of Oeiras knew no opposition. Made "Marquis of Pombal" in 1770, he effectively ruled Portugal until Joseph I's death in 1779. However, historians also argue that Pombal’s "enlightenment," while far-reaching, was primarily a mechanism for enhancing autocracy at the expense of individual liberty and especially an apparatus for crushing opposition, suppressing criticism, and furthering colonial economic exploitation as well as intensifying book censorship and consolidating personal control and profit.

Was the new Count of Oeiras opposed by anyone after the Tavora affair?

knew no opposition

In which year was the Count of Oeiras made the Marquis of Pambal?

How long did the Marquis of Pombal rule Portugal?

until Joseph I's death in 1779

What did Pombal's enlightenment promote at the expense of individual liberty?

autocracy

What was Pombal's "enlightenment" an apparatus for?

crushing opposition, suppressing criticism, and furthering colonial economic exploitation