What caused the current economic crisis in the U.S.?

The 2008 financial crisis is considered to be the worst economic crisis the world has faced since the great depression (1930) the effects of the crisis go from the risk of a total collapse of the greatest financial institutions, the need of government to invest money to save banks and enterprises in order to recover confidence in investors and well linked to globalization, there were also falls in the world markets.

The previous effects affect the macroeconomic scope, but talking about microeconomics, the percentage of unemployment in the U.S. rose up to 9,7% during 2010 (when the crisis was supposed to be over), families were pushed away from their homes into streets, and the index of suicides also rose because of the instability and uncertainty.

What happened?

To understand how the situation got so dramatic, even to affect the European Union by contagion dragging them into the fall of 2 economies (Greece and Spain), let’s look at the causes:

Easy credit conditions to buy homes.

Lenders and Real Estate companies lend money to basically anyone who asked for a loan for a mortgage, by this when the prices went high and the home owners were unable to pay the mortgage the whole cycle of lending and paying broke and banks crashed. To counter this, when the situation got extremely dramatic the Government was practically forced to subsidy this by giving money from the Federal Reserve to banks.

Incorrect pricing of risk

When the Real Estate companies and the investors made the plan of lowering restrictions for home owning they knew they had risks, as in any other business, the thing is that they did not made a long term analysis of the worst case scenario, so when the crisis started they were not covered up with solutions. Almost 6% of mortgage loans are in debt, when the historical record is of 0.25%.

Is it over? The banking crisis yes, the economic crisis NO.

SOURCE:

http://www.aim.org/guest-column/the-cause-of-the-2008-financial-crisis/

http://www.indexmundi.com/es/estados_unidos/tasa_de_desempleo.html

http://www.globalissues.org/article/768/global-financial-crisis

DEMOCRATS-REPUBLICANS

 DEMOCRATS - REPUBLICANS

Along the U.S. history, 2 parties have ruled the political life, these are the Democrat party and the Republican party. Not because they are the only parties, but because these are the only ones that have make it to the Presidency.

The main difference between these parties is that the Democrats are considered liberals and the Republicans are considered conservators. It is important that we understand that the conception of “left” or “right” is different depending the country, and in America the difference between this 2 is very little.

Let’s see the essential differences.

Democrats, are in favor of an interventionist government within the corporate sector in order to regulate their activities, since they believe economy should be controlled by the State. On the other hand, Democrats refuse to regulate issues linked to morality and traditions of the citizens, they are in favor of the social struggle, the constant improvement of communities and the establishment of social welfare laws to protect especially the minority groups within the country. 

Their foreign policy view is oriented towards the NO involvement in international conflicts or foreign wars, leaving international issues rather to the U.N. or other international institutions.
This explains President’s Obama campaign of removing troops in Iraq, even when this haven’t happen.

Republicans, “The grand old party” or “The party of the rich” believe that government should not intervene in the economy, as a neoliberal approach.  They assure that the State should regulate the social behavior of individuals (They are against of homosexual marriage and adoption, drug consumption and some other). Away from the social stratification proposal of Marx, they assure that in society all the roles are given and should NOT change at all since this would alter the order the country has. 

Republicans are the majority in the Chamber of Representatives of the U.S. and this makes them the biggest opposition to Barack Obama’s government.

As for their foreign policy view, they promote military use and the projection of the U.S. as the super armed power it is and even show off more than what they actually have. 

SOURCES 

http://www.democrats.org/

http://www.gop.org/

What makes the American presidential system so unique? 

The characteristics of a presidential system are

• Separation of power. In the specific case of the U.S. this is a core because of the checks and balances its political system has since the past.
• Unification of the roles of head of state and head of government under the figure of the President. President is also commander in chief of the military forces.
• Election by suffrage. This gives the president the legitimacy of the citizens.

•            President CANNOT dissolve the congress. This again gives the check and balance to the system, although they work together, they are independent of action.

As we know, The United States political principles are based in DEMOCRACY as the ruling ideology for whatever decision they make, whether it is economical, civil, military or political, and their system as it is presidential is not an exception.

The United States presidential system is defined by this specific traits:

Popular Sovereignty Since the president is elected by popular methods, even when it is not a direct suffrage they use their right to vote to orient the election towards their favorite candidate.

Division of Power To avoid tyranny and promote cooperation the power is divided and does not only relay in the Executive power.

Federalism To keep the nation cohesion and avoid the problem of the confederation and the willingness of independence of some states in the union.

Representative democracy Comes as a tradition not only from ancient Greece but more close, from the colony when they had William Penn and the representative assemblies. Democracy is the government of the people, so the president is the director of the nation but because and for the people.

Legal equality As it is stated in the Declaration of Independence, "Equality before the law”, since then the American life has been marked by the defense of equality (Civil Rights, Black people voting, Women’s rights etc.)

Judicial Revision Courts and tribunals are in charge of the constitutional and administrative control of the law. Any law or administrative act which is clearly opposed to the Constitution can be objected and ruled out by any tribunal and ratified by the Supreme Court.

Limitation of the State´s power (public power) –Limitations are established in the Constitution, and the Declaration of Independence, marked by a defense of individual rights in all foundational documents and State regulations. This is the base of the Federal spirit of the U.S.

Preponderance of civilian power over political power Since the President is the representative of the people and as well is the head in chief of the military forces, The Armed forces are under direct mandate of the people of the United States, represented by the President.

Political absenteeism  40% of the American citizens who are able to vote, chose for abstention this mark either they dislike and do not trust the candidates or that they trust in other’s decision to be best than their own.

As these characteristics denote the uniqueness of the U.S. Presidential system, it is not static and with the changes the world is presenting and even the internal dynamic of the county, it may vary from what we know today to the future. 

SOURCE:

Louis F. Monroy Class notes 

As we started the debate in class about what does “being an American” really mean, some of the arguments in the debate went from “Having migratory preferences when travelling trough the world” or even “Having the opportunity to belong to the most powerful race on earth” as having the citizenship of the United States of America.

What about the “chosen ones” to live the easy life, isn’t that what Hollywood always sales to us? The American society is the perfect society, where everyone has a place and a variety of opportunities.

If we go to the literal response to that, according to the American constitution the answer would be:

• -    Any person born in U.S. territory. (Guam, Puerto Rico, Virgin Islands, District of Columbia, Northern Mariana Islands.
• -          Children of U.S. citizens, no matter where they were born.
• -          By naturalization (after being a U.S. resident)
• -          Honorary citizenships

But more than a “green card” or a passport, being an American involves a series of behaviors, ethnicities, ideology and more cultural characteristics.

As Bellah mentions in the text “Civil Religion in America”, Americans hold a “civil religion” that cohesion them as a society, this religion is characterized by the inherited symbols, values, rituals and even holidays (as Thanks Giving).

When we think of the north American society we picture in our mind a multicultural society, united by their difference, in religion, in ethnicity, race etc. so when we figure out how cohesionate they are by this supra culture, at least I am amazed.

So another characteristic of what does being an American mean just came up.

This multicultural society exports to the world their “democratic” life, where you can get a burger for a buck and faster than you tinkle, the society of consumption.

As for decades this society ruled the world, when they got “ill” the whole world suffered of it as well, and the economic crisis of 2008 was not an exception.

Inside the country this idea of the solved life crashed as the amount of families in the street rose. The collateral effects in the globalized world appeared as the Greek economy crashed, and the Italian, Spanish and the whole European Union’s economy trembled.

So, this is another characteristic, being an American is to be somehow responsible of the WHOLE world’s wellness.

It would be unfair to blame a simple citizen for everything, but actions of one, makes the destiny of a whole.

SOURCES

“Citizenship and nationality” U.S. Department of State.

Bellah R. (2005), ´Civil religion in America’ in Daedalus, Vol. 134, No. 4, 50 Years (Fall,

2005), pp. 40-55, MIT Press.

What has been the effects of the “War on terror” of the U.S. Foreign Policy?

U.S. foreign policy during the Cold War was characterized by inclusiveness, the disposition the Nation showed to support any country that opposed or was threatened by communism. 

After the Cold War came the "war on terror."

The War on Terror  is the term used to reffer to an international military campaign which started as a result of the 9/11 terrorist attacks on the US. 

Terrorists tried to crash planes into the World Trade Center in 1993 and bombed the U.S. embassies in Kenya and Tanzania in 1998. Then came the attacks of September 11, 2001. In response, the United States attacked Afghanistan. 

During the war on terror, the US has not been as inclusive as it was in during the period of the Cold War.

But since the rush to erradicate terrorism came, the United States did not realize how deep the fault lines in Iraqi society were between Kurds and Arabs, Sunnis and Shiites, and the members of different tribes and local religious groups. (Foreign Policy).

Nowadays because of the destruction of the traditional Iraqi society and social boundaries because of the devastation the war brought, for the first time in centuries power is in the hands of the Iraqi Shiites.

The War on Terror launched by the Bush administration as a consequence to the 9/11 attacks has reshaped various features of US foreign policy and will have a huge impact on international relations and global strategic configurations, as it happened with the Shiites taking over the power in Iraq.

In an attempt of isolationism of terrorism, President Bush presented the Bush Doctrine, stating "you are either with us or against us", by this he was making preassure in other countries to support the US in the rasing conflict, as it is clear, this policy does NOT allow neutrality. 

Somehow and it is very shamely to say that after 12 years the struggle to "make the world a peaceful place", the world is not a safer place to live in. 
The US caught Sadam Houssein and Osama Bin Laden the names and faces of terrorism, and still the war has not finished, and it is then when I reflect about the real intentions of the US intervention in Iraq and Afghanistan.

The citizens of these cities are living in precarious and non safe situation. Poverty increased, diseases and opportunnities to develop are almost nule. So where is prosperity?

As a personal thought, I can't wait to see the US remove it's troops from these territories, since the conflict is leading NOWHERE but more devastation.

SOURCES:

Foreign Affairs

People's Daily Online

How did the U.S. attempt to stop the spread of communism and influence international security during Cold War?

The Cold War, often dated from 1947 to 1991, was a sustained state of political and military tension between powers in the Western Bloc, dominated by the United States with NATO among its allies, and powers in the Eastern Bloc, dominated by the Soviet Union along with the Warsaw Pact. This began after the success of their temporary wartime alliance against Nazi Germany leaving the USSR and the US as two superpowers with profound economic and political differences. A neutral faction arose with the Non-Aligned Movement founded by Egypt, India, and Yugoslavia; this faction rejected association with either the US-led West or the Soviet-led East.

As the U.S. was the leading nation of the Western Bloc, they made strict restrictions to stop the spread of communism among the world, and those restrictions were compacted mainly by the Truman Doctrine and the Marshall Plan which I describe ahead.

TRUMAN DOCTRINE:

The intend of President Harry S. Truman by the Truman Doctrine was that the United States would provide political, military and economic assistance to all democratic nations under threat of comunism. As an effect the Doctrine gave a new direction to US foreign policy, from its usual scope of regional conflicts not directly involving the United States, to one of possible intervention in long distance conflicts. 

Truman said that the Cold War was a choice between freedom and oppression.   Therefore, Americans would have to abandon their decision not to get involved in European affairs; America was FORCED to get involved: 

Under the reality of a deteriorating relationship with the Soviet Union and the appearance of Soviet thoughts in Greek and Turkish affairs, the withdrawal of British assistance to Greece was the breaking point for the Truman Administration to reorient American foreign policy.

By this speech Truman reincorporated the Monroe Doctrine and led directly to the Marshall Plan.   It set a precedent for the principle of ‘collective security’ and NATO. 
It brought up the ‘Red Scare’ in the United States and in the USSR it convinced the Soviets that America was indeed threating Soviet Communism.

  

The Doctrine also embraced the policy of ‘containment’, meaning by this to keep trapped comunism within the boundaries of the USSR, and to avoid at any cost the spread within some other Nations. It was indeed a priority for the National Security of the US to stop the spread of comunist and totalitalian thoughts, since their security was depending in the clear break up with the traditional avoidance of commidtment with Western Hemisfere nations during periods of peace, the Truman Doctrine committed the US to support democratic nations to hold on political integrity obviously the US was receiving more hegemony and support back.

Marshall Plan:

After WW II, Europe was devastated. Millions of people died during this period of time, not just by war but because of poverty. There was no industry all along Europe, this meant no jobs or money to invest.   Transportation infrastructure were in ruins. This seemed to be the end of the old continet as a major poer. The only major power in the world that was not significantly damaged was the United States. 

Since 1945 and until 1947, the United States supported european economic recovery with direct financial aid.  Military assistance to Greece and Turkey was being given to prevent the spread of comunism in the region. 

Officially known as the European Recovery Program (ERP), the Marshall Plan was made to rebuild the economies of western Europe.  Marshall was convinced the key to restoration of political stability lay in the revitalization of national economies because in the long term he dimensioned political stability in Western Europe as a key to content the advances of communism in that region.  Besided they would become supporters of the ideology of the US in the Cold War.

The nations supported by the Marshall Plan were assisted greatly in their economic recovery.  From 1948 - 1952 European economies grew like never before in history.  Trade relations led to the formation of the North Atlantic alliance. Economic prosperity led by coal and steel industries helped to shape what we know now as the European Union.   

SOURCES:
http://history.state.gov/milestones/1945-1952/TrumanDoctrine
http://www.marshallfoundation.org/TheMarshallPlan.htm

American Studies Notes by Louis Monroy

What policy measures taken during the interwar period represented a shift from interventionism to isolationism and how did they affect America’s international stance?

After the fists world wide conflict, World War I the US attempted to become less involved in world affairs, not just to protect their economy, but because the population demanded so.

The US refused to join the League of Nations (intergovernmental organization founded as a result of the Paris Peace Conference that ended the First World War. It was the first international organization whose principal mission was to maintain world peace.).

Although President Wilson made preassure within the congress to make the US a member, opposition in the Senate was significant since americans, after learning of the destruction and cost of WW I, opposed to involve their nation in another European conflict which could lead to another devastating war, they perceived the European States as conflict makers and likely to become involved in disputes that would drag the USA to a conflict that didn’t affect their own interests.

The US closed the doors to immigration during the 1920's. Early on the US had excluded Chinese, Japanese, and other Asians, but later the US began to exclude even Europeans, particularly eastern and southern Europeans.

Why did the US, a nation of immigrants, suddenly turn against immigration?

1) Anti-European feelings after WWI;

2) Organized labor believed cheap immigrant labor forced down wages;

3) Railroads and basic industries were well developed by 1920's and industrialists no longer felt the need for masses of unskilled workers;

4) More established Americans descended from northern Europe felt recent immigrants from eastern and southern Europe could never be truly American, and they also saw them as inferior; 

5) Radical political movement and ideologies such as socialism, communism, and anarchism were viewed as European in origin and as potential threats to political stability in the United States.

Immigration Laws:

1) Quota Act of 1921 – limited immigration from each country to 3 % of total number who had immigrated in 1910 and set a yearly limit of 350,000

2) The 1924 quota reduced the quota to 2%, the base year changed from 1910 to 1890. This discriminated against eastern and southern Europeans because many had come to the US after 1890

3) National Origins Act of 1929 – the base year was moved to 1920, but total number was set at 150,000

The War of Tariffs:

The US established very high tariffs on imports to blind their economy from foreign products. Keeping out the cheap foreign products the population was forced to buy the expensive American produced products.

So, as a result to the un-loyal practices from the US, foreign nations responded by raising their own tariffs and excluding American manufactured and farm products from foreign markets.

War Debts Unpaid:

During the WWI the European nations borrowed millions of dollars from the US to bare the war expenses, and they accumulated an enormous debt, about $10 billion dollars, so the US had to lower their interest rates to incentive the fast payment from Europe, but high tariffs in the US prevented Europeans from earning the dollars they needed to pay off the loans.

So they looked to Germany’s war reparation costs as the solution to their debt problems since the total amount of German reparations was $33 billion. Germany however was completely unable to pay the reparations. Germany even attempted to borrow money from European and US banks to pay the reparations, but since the situation was so chaotic they wouldn’t lend any money to Germany.

By 1930 Germany was totally unable to make any other reparation payments.

As we have seen all along history American relations with Latin America had been characterized by US intervention to protect American investments and lives, this under the belief of the Monroe Doctrine.

Off course, Latin American governments were oppressed and uncomfortable by US military intervention and the influence of American business on their economies and policies.

By the early 1930's however relations with Latin America had improved, the State Department declared the Monroe Doctrine would no longer be used to justify US intervention in Latin American domestic affairs, as a result Latin American nations encouraged US investment and gave greater protection to these investments.

The Pact of Paris attempted to settle peace world wide and was accepted by 62 nations.

Somehow, a few years later the US was dragged into war by the Japanese attack to Pearl Harbor and brought the nation’s military hegemony back in the international system, bringing also terrible consequences as the nuclear bomb release.

After this moment in history, the US have had an unstopped involvement in international conflicts, whether as a supporter, as a protector or as an aggressor.

SOURCE: http://www.andycrown.net/isolation.htm and American Studies Class notes by: Louis Monroy and