Phil 105 Notes
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
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