Phil 105 Notes

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First Day of Class:
Ancient (greek and Roman)
Dark Ages (things were a mess)
Medieval
Modern

1/27/12
Stock market is a signal of economy (optimistic)
When pessimistic bad stock market
1982 people became excessively optimistic (excess debt)
wages stagnant since the early 1970s
made up difference by borrowing debt
Start of the FIRE economy
Finance
Insurance
Real Estate
Manufacturing peaked in the 1970s
With FIRE Wall Street got huge
Securitization (sold bundled debt
1994 masses became interested in Stocks
Following the historical trend:
Excess confidence = excess risk (peak)
Alarm 2002 (small drop)
Panic of 2007 (dip, instability)
Sovereign debt problem (took on too much debt)
At the limit of what they can be loaned
Mass panic Stage (huge drop)
Has 10,000 points to lose to end the bubble
What should the function of finance be?
Should it be abolished?
Can we live with out it?
Risk mediation (function)
Hunters and gathers (diversification)
100-200 different plants to eat
moved around to different areas
Social diversification
Always had a reserve (natural)
Agriculture (social surplus)
Risks
Crop failure
Pests
Social surplus helped protect the community if risks proved to be to much Elite manage to social surplus
Serve own self interest (status showplace)
When challenged by other elite (better managers) they may be replaced (French Rev) Greeks first to make use of money (west)
1st financial innovation (1)
silver
provides liquidity (can convert to value in money so you can trade) Italian City states Renaissance: (2)
Bond market invented (always at war)
Way to finance war
City states sold bonds to its own citizen
Big Countries debt so large= can't sell to own citizens’= foreign bond holders Queen Elizabeth I Stock Market (3)
Had to raise revenues (excess debt)
Sold charters in companies
1st stock market in Amsterdam
beat France and Spain in a war (financial system could fund army more effectively) national bank
stock market
bond market
1/31/12
Stages: People are irrational emotionally driven (animal spirit) 1.) alarm draw back from confidence (market drops)
2000-2002
Confidence= future trend is forecasted to be up
2.) reliefBuy (optimism increase) Just keep swimming!!
2002-2007
3.) Panic decide to leave situation (fear in control)
insider panic 2007-2009
sovereign panic 2009-2011
mass panic ????
4.) false hope Finally it is over? (market up and down)
5.) despair Life is always bad (future trend is forecasted to be down)

Wall Street (movie)
1.) Ethics of speculation
Short selling borrow stock and then sell it, when price goes down you bought it back. (Speculation) when they think an asset is too high (predict it will drop) 2.) inequality (1% to be blamed for everything)

tax them or take wealth what to do!!!!
Gekko (speculator) vs. Sir Larry (investor)
3.) Change in middle class
Bob Fox (baby boomer, blue collar work is low status, FIRE economy) and Father (blue collar union worker) Both were once labeled middle class
NEW VS OLD
Lou is moral charter (greek tradgy)

2/6/12
Essay: Discuss the ethical pros and cons of speculation (Speculating vs. investing) Must use all the material

Movie:
Thesis
Investment (lou, early bud)
Sir Larry
Bud’s Father
Anti-thesis
Speculation
Gekko (Bud)
John Maynard Keynes:
Social Conservative
Large unemployment= social unrestbad (maintain to existing capitalist order) During depression
Wants to prevent Social unrest to maintain status quo
StockTotal return = Capital gains + dividends (investors)
1.) selling risk to buyer of risk
Capital Gains: bigger fool theory (speculators want)
Sell stock at a higher price that you bought it for
Real Estate is not an investment (it's a consumer good)
Unless you rent it out!
Speculators:
Buy low, sell High
Pump and dump (illegal)
2/8/12:
Keynes:
In Finance, confidence is...
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