A stable financial system is an important component of an efficient market. Ensuring financial stability allows markets to allocate resources, assess and manage financial risk, and maintain employment levels close to the natural rate. When a bank has failed, the FDIC works to ensure that there are no major disruptions of financial transactions and that economic agents can continue to operate with confidence. With a strong market, the FDIC doesn’t need to intervene often, but the agency was very active during the Great Recession when a lot of banks failed. When a bank failure does occur, the FDIC works to transfer assets of one bank to an acquiring bank or they will take on those assets themselves until the find a suitable acquirer.
South Park — Necessities & Substitutes
The economy of South Park has dwindled and Randy has some suggestions on they can survive the economy’s wrath. He recommends substituting many of their everyday items for cheaper alternatives, and returning back to the basics: water, bread, and margaritas. During recessions, income and wealth take a dip and people are unable to afford many of the items they may have once consumed. This shift allows for a discussion of inferior and normal goods.
Thanks to Zoe Cook-Nadel for the suggestion!
South Park — Spending and Debt
Stan gets a no-limit credit card and pays the debts for the citizens of South Park so that they can go out and begin shopping again, and stimulate the economy. The entire episode is themed around the crucifixion as Stan “pays for the debts” of everyone in town. Keynesian economics argues that governments can increase spending during times of recessions in order to help lift the economy out of recessions.
Thanks to Zoe Cook-Nadel for the suggestion!
South Park — Fiat Money
Stan describes the economy as being both real and not real at the same time. The market works because people believe in the economy and believe that paper money and plastic can count as spending. The concept of fiat money stems from people’s belief that the currency they hold actually has true value. This differs from commodity money in that the currency is not tied to a single asset.
Thanks to Zoe Cook-Nadel for the suggestion!
South Park — Substituting Inferior Goods
Now that the South Park economy has dwindled, citizens are left to wonder why the economy has turned sour. Randy suggests a variety of methods of ways everyone can cut back. Without realizing it, he lists a variety of inferior goods for the citizens, which increase demand from decreases in income, like from a recession.
Thanks to Zoe Cook-Nadel for the suggestion!
South Park — Failing Economy
Stan’s dad discusses why he believes the economy in South Park is failing. Modeled after the Great Recession, Stan’s dad believes that too many people were buying unnecessary items on credit, but then not being able to pay for those items. Since times are tough, dinner isn’t exactly what the family is expecting. Even though his father believes people wasted a lot of money on things they don’t need, he proceeds to make himself a margarita using his newest blender.
Thanks to Zoe Cook-Nadel for the suggestion!
South Park — Margarita Securities
Stan tries to return his dad’s Margarittaville machine so that his family can have a bit more money during the recession. Turns out that his dad bought it on a finance plan, which has been repackaged and sold to investors. Similar to mortgage-backed securities, loans can be issued for assets and then re-packaged to spread out risk among risky investments. If you’re looking for an easy way to teach about the MBS crisis, this scene does a great job condensing the major components.
Thanks to Zoe Cook-Nadel for the suggestion!