The 2008 Global Financial Crisis: An Extended Case in Macroeconomics

Told through the crisis chronology and from the ETF desk at Lehman Brothers and then Barclays Capital, where I traded through it.

Adam W. Stauffer · Lecture decks built; book in progress

The idea

Every tool in an introductory macroeconomics course — inflation, unemployment, GDP, valuation, money, policy, the exchange rate — was stress-tested in public during the Global Financial Crisis. This book reads each one as a trading desk lived it in 2007–2009: one date at a time, knowing only what had printed that morning.

Textbooks show the revised data and hide the decision. A desk never sees the economy whole or on time. Data arrive as first prints, get revised later, and decisions get made on the version that turns out to be wrong. Each chapter here opens on a dated morning, teaches the chapter's macroeconomics straight, and then shows what the revisions and the following months revealed.

How each chapter works

• The date and the desk. The morning, the event that defined it, and what the desk was doing.
• The snapshot. Nine numbers as they printed that day: payrolls, unemployment, jobless claims, GDP, house prices, the fed funds rate, the 10-year yield, the yield curve and the S&P 500.
• The markets. Stocks, short and long rates, and oil over the trailing year.
• The tool. The chapter's macroeconomics.
• What happened next. First print against the revised number, and the road to the next chapter's date.

Contents

Draft. Titles and order will change.

Prologue · The crisis in one picture

2001 to 2009 · Buildup, spark, contagion, fallout

The imbalance between the United States and China that the whole book sits on, and how to read a book that knows only what was knowable.

Act I · The desk

1. 1FX in brief27 February 2007 · Shanghai falls 8.84% and the Dow 416 points
2. 2InflationFebruary–August 2007 · Subprime lenders fail; two Bear Stearns funds collapse

Act II · People and output

1. 3Labor markets7 March 2008 · Payrolls fall a second month, then Bear Stearns is sold
2. 4Growth31 July 2008 · Q4 2007 is revised to a contraction

Act III · The instruments

1. 5Bonds in brief15 September 2008 · Lehman files; the S&P 500 closes 23.8% off its peak
2. 6Equities in brief15 September 2008 · Lehman files: the view from the index volatility desk
3. 7Derivatives in brief16 September 2008 · The Fed lends AIG up to $85 billion

Act IV · The plumbing and the response

1. 8Money, banking and the plumbing10 October 2008 · The TED spread prints a record 4.58
2. 9Monetary policy and the Fed16 December 2008 · The Fed cuts to zero–¼ percent, its tenth cut in 455 days
3. 10Fiscal policy and the government response17 February 2009 · The $787 billion Recovery Act becomes law

Act V · The world

1. 11The aftermath9 March 2009 · The dollar peaks; the S&P 500 bottoms at 676.53