Causes Of The Great Recession

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Jamie Hake Keith AP Government/Economics Period 4 The Causes of the Great Recession Wall Street had been building a house of cards. It was a long and grand progression, and as fortunes grew higher, the risks taken grew higher as well. The house finally grew so unstable that it collapsed, and it brought much of the world down with it. Ultimately, the Great Recession was caused most directly by the irresponsibility of the financial industry. Deregulation, in the works since the Reagan administration, allowed companies the leeway to commit such irresponsibility. Companies then began making questionable loans, and placing unreasonable bets on said loans. These loans were profitable, but not sustainable. When the system finally fell through, the …show more content…

This happened especially in the housing market. Lenders gave out hundreds of thousands of subprime mortgages to new homeowners. The decision to buy a home seemed very logical at the time. Many were buying homes, and home prices were going up. People wanted to buy before prices got higher. Yet eventually this bubble burst. The cycle was not sustainable. People bought homes that they could not afford, and when they began to default on their loans, the market fell through. Housing prices dropped, and a great many people lost their homes. This was the beginning of the Great Recession. …show more content…

It could have been simply another recession, fueled by the usual causes, as discussed in Ravi Batra’s “Conventional Wisdom.” Instead, it was made into something much worse, something reminiscent enough of a depression to earn the name “Great Recession.” It was mainly the wide-scale irresponsibility of the financial industry that pushed us so far over the edge. Deregulation allowed them to give bad loans, which were then compounded upon by complex financial tools, such as CDOs and derivatives. The situation was made worse by the incredible inequality present in our nation at the time. Batra wrote that main cause of a depression over a recession was mainly an unequal distribution of wealth. Our country still suffers from a truly incredible level of economic inequality, and indeed, Wall Street has yet to be strictly regulated again. The ever massive federal deficit remain as well. The policy decisions that led to the events do not appear to be changing any time soon, which must make one question what the future

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