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Financial Crisis at Home and Abroad

Financial Crisis at Home and Abroad

Lessons Learned, and the Way Forward
September 16, 2008

Two of Brandeis University's leading authorities on the U.S. economy and international finance analyzed the deepening economic crisis before standing-room only crowds at Boston's Old State House Sept. 23 and in Rapaporte Treasure Hall on campus Sept. 24.

Lisa M. Lynch, dean of the Heller School for Social Policy and Management, discussed how a continued freeze-up of credit markets in reaction to the recent chaos on Wall Street could cause a spike in unemployment that would prevent the housing market from stabilizing and lead to a deep recession in the United States.

Bruce R. Magid, dean of the International Business School, analyzed the options that are open to the United States if it is to remain a leading competitor in global markets. He stressed the need for America to regain its moral compass, invest in education, look hard at its level of military spending and encourage entrepreneurship in environmentally sound businesses.

In the campus forum, Lynch explained two types of borrowing by banks by telling students that borrowing from other banks is like borrowing from their roommates while borrowing from the government is like borrowing from their mothers.

Magid told the students that "if you didn't like what Mom had to tell you, you might be downright depressed about when Dad talks a little bit about the outlook for the U.S. financial system, the U.S. economy and the world economy."

Both deans stressed that very serious challenges lie ahead of the U.S. president who will be elected in November, and that said the economic situation may worsen significantly if the credit freeze continues, if unemployment increases significantly, or if foreign investors lose interest in keeping their assets in U.S. dollars.

The forum was moderated by David Warsh, a longtime economics columnist for the Boston Globe and proprietor of the economics Web site EconomicPrincipals.com. The event was sponsored by the Brandeis Votes project of the Undergraduate Student Union and the university's Office of Communications.

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