The Great Recession |
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Definitions
Austrian Economics - The school of economics developed by Ludwig von Mises. http://mises.org/
Boom/Bust Cycle - According to the Austrian School of economics, excessive lending causes an artificial boom in economic activity which is followed by a bust that cleans out malinvestment.
Debasing A Currency - Reducing a currencies' value versus other currencies. Accomplished through expansion of credit or printing money.
Deflation - Decrease in the money supply and subsequent price decreases.
Depression - 10% top to bottom drop in GDP.
Dollar Index - A weighting of the US dollar vs. a basket of the following six currencies: Euro, Japanese Yen, Pound Sterling, Canadian dollar, Swedish krona, Swiss franc. Dollar Index Graph.
Fiat Money - Money created by decree. Fiat money essentially has no backing - i.e. not officially convertible at a fixed rate to something else - gold, silver, etc.
Fractional Reserve Banking - The ability of a banking institution to keep a fraction of money deposited on hand while lending out the rest.
GDP (Gross Domestic Product) = private consumption + gross investment + government spending + (exports − imports)
Great Depression - 25% top to bottom drop in GDP.
Gresham's Law - An artificially undervalued money will drive an overvalued money out of circulation. i.e. - the pre-1965 90% silver / 10% copper quarters no longer circulate while people actively use the current nickel clad copper quarters.
Inflation - The classical definition was expansion of the money supply with price increases following. 19th century definition included the expansion of credit.
Monetization - When used in the context of a country, typically means the central bank prints money to purchase government debt.
Money Multiplier Effect - The result of fractional reserve banking. Assuming a 20% reserve policy, $100 lent to a bank can turn in to $80 lent again, which can turn into another $64 lent once more and so on.
Keynesian Economics - The school of economics developed by John Maynard Keynes.
Recession - The National Bureau of Economic Research (NBER) has not produced an official standard, but the unofficial standard is two or more quarters of negative GDP growth.