In December 2008, the National Bureau of Economic announced that the economy had entered into a recession a year ago in December 2007. It took a year for the government to declare that we were in a Recession. The United States was very close to a financial market meltdown and economic collapse in the late 2008 and early 2009. United States entered a severe recession accompanied by considerable job losses, skyrocketing unemployment, lower wages and a mounting number of American families at danger of foreclosure and poverty. The unemployment rate increased from 4.9% in December 2007 to 9.5% in Jun 2009. The Dow Jones
Industrial Average (DJIA) reached a peak of 14, 279.96 in October 2007 and then fell to 6,
440.08 in March 2009, a drop of almost 55% from the peak (Holt 2009).
Most economic experts in America could agree that the primary cause of the current recession was the credit crisis evolving from the bursting of the housing bubble. Demyank and
Van Hemert (2008) found that the value of subprime loans depreciated for six consecutive years before the crisis and that the problem could have been detected long before the crisis, but they were hidden by the rapidly rising home prices. The housing markets that had the largest home price increases were ordinarily markets where the local government enforced land restrictions that restricted the supply of land available for housing. Relaxed mortgage lending standards were mainly the product of government guidance. Krugman (2009) stressed that much of the financial that steered the housing bubble came from the unregulated “shadow banking system”
(investment banks, hedge funds, structured investments vehicles, etc.). The shadow banking system became highly influenced, and the bursting of th...
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...ubble and its results arose from market misrepresentations created by the
Federal Reserve, the government backing of Fannie Mae and Freddie Mac, and the Department of Housing and Urban Development and its Federal Housing Administration. Americans suffered through a severe recession in 2008 and 2009, due to a decline in adhering to government policies. We need to identify and redo policies that mislead housing and financial markets, and demolish fail agencies and departments, such as HUD. We should be guided by recognizing the two main errors that have been made. First, cheap-money policies by the Federal Reserve do not produce sustainable success. Second, delivering mortgage backing by imposing affordable housing mandates on banks and by providing federal support to Fannie Mae and Freddie Mac bonds can go wrong in a tragic way that damages the economy (White 2008).
Just as the great depression, a booming economy had been experienced before the global financial crisis. The economy was growing at a faster rtae bwteen 2001 and 2007 than in any other period in the last 30 years (wade 2008 p23). An vast amount of subprime mortgages were the backbone to the financial collapse, among several other underlying issues. As with the great depression, there would be a number of factors that caused such a devastating economic
report of the national commission on the causes of the financial and economic crisis in
...ults of the recession. In order for this never to happen again, there is a need to learn from the mistakes in the past and to look for the warning signs. The problem is not just restricted to one country, but is a global problem and needs to be addressed as such.
However prior to 2008, nearly everyone was blind to their impending doom; investors, bankers, government regulators, the general population, and even the chairman of the Federal Reserve, Alan Greenspan, a man who was considered the economic guru, was fooled into believing the prosperity America had been enjoying would last for the foreseeable future (“Rethinking” 20). By this time there had been only mild economic downturns or, at most, short periods of turmoil. Financial institutions and large corporations had grown accustomed to the decades of economic prosperity resulting from the post-war economic boom, long forgetting the lessons learned from the Great Depression (“Rethinking” 20). In fact, economists concluded that America had entered a new era of calm. After a generation of portfolio managers and investors profiting from decades of favorable returns on stocks they believed the modern economy was impervious to major calamities (“Rethinking” 20). As inflation rates fell from record highs in the late 1970s and early 1980s to the record lows that they are today, interest rates followed enabling Americans to borrow more money from
started to plummet as the economy has begun this recession. It may seem as if the country that
...over the world. And world took two year to recover not fully but up to extend from this crisis.
subprime mortgages were major factors of the collapse of the 2007-2009 economy collapse. All of America suffered from the 2008 recession.
The easy availability of credit in U.S, Russian debt crises and Asian financial crises of late 90’s showed the way to a housing construction boom in the USA. The relaxed lending rules and increasing property prices along with the increase in foreign funds added to generate this real estate bubble.
At the same time in 1977, it was the United States during the abyss of the seventh financial crisis. The economy was seriously
According to the article on “Economic Recession” from Issues and Controversies, a panel of economists determined that the U.S. was in a recession from December 2007 to June 2009, making it the longest ...
What caused the Great Recession that lasted from December 2007 to June 2009 in the United States? The United States a country with abundance of resources from jobs, education, money and power went from one day of economic balance to the next suffering major dimensions crisis. According to the Economic Policy Institute, it all began in 2007 from the credit crisis, which resulted in an 8 trillion dollar housing bubble (n.d.). This said by Economist analysts to attributed to the collapse in the United States. Even today, strong debates continue over major issues caused by the Great Recession in part over the accommodative federal monetary and fiscal policy (Economic Policy Institute, 2013). The Great Recession of 2007 – 2009 enlarges the longest financial crisis since the Great Depression of 1929 – 1932 that damaged the economy.
All good things must come to and end. In late 2005, the housing bubble burst, and housing began to decline in price. People who refinanced, particularly those who financed with variable interest rates suddenly found their homes were valued at much less. The housing market became flooded with homes for sale, because the homeowners with variable rates and interest only loans could not continue to make their payments. (Greenspan) The rise in the number of homes for sale caused further lowering of home values.
The main factor that put us in a recession in 2007 thru 2009 was the crash of the housing market and subprime loans. Are we are no longer in a recession. But where are we?
Recessions would always be there. It is how best governments, businesses and the people are prepared for them that matters.
The PBS Frontline documentary, Money, Power, and Wall Street gives the audience a little history about the causes of the Great Recession. Frontline some of the major people from Giorogs Papakonstaniou, the Former Greek Financial Minister; Sheila Biar, chair member of the FDIC during the crisis, and Robert Wolf the chairmen of UBS Americans to name a few. The crisis of 2008 not only made about 8 and half million Americans unemployed, but also a loss of about $11 trillion in net worth. On top of that, the nation was divided with radical movements from the left and right like Occupy Wall St. and the Tea Party forming as a result of the crisis in 2008. Some may say that this was just a result of capitalism and not enough government regulation on Wall St.