Great Recession Effects

world felt the effects, with some of them being felt to this day. I will

be focusing more on the effects of the recession, more than the causes. But, the general recession

in America started due to combination of many things; the housing bubble bursting, and the

banks giving out bad loans and causing a credit bubble. (Financial Crisis Inquiry Commission, p2) There were other

factors as well, but these were the key ones to creating the great recession.

During this great recession, a lot happened in a very short period of time. The stock

market dropped significantly, the unemployment rate went up significantly as well as millions of

people losing their jobs, and the availability of loans went down (Bernanke p87) ; all of these happened

for different reasons but were contributing factors to each other.

While the stock market isn’t the

perfect way to see how an economy is doing in every way, you can see the general health of the

it just by looking in some ways. In the span of two years, the Dow Jones Industrial Average

dropped from a high of 14,165 in 2007 to a low of 6,547 in 2009. (Grusky p4) . This lead to

significantly less liquidity in businesses, banks, and also lead to a lot of businesses closing their

doors and laying people off. It is hard to get %100 accurate numbers of the unemployment rate,

but in 2009 the United States had about %17 unemployment rate. (McNally p23) This caused a lot of

these unemployed people to not have the money for food, healthcare, and other social assistance

programs, but sadly a lot of these programs were also being cut at the time . (McNally p23) In the housing

market, some houses which had been bought a few years before hand fell by more than 50% (Grusky

p4) . All of these problems tended to hit the non-white Americans harder than the white ones as

well.

While this was going on the United States government was doing what they could to try

to help the situation. When it came to employment, those who had lost their jobs could file

for

unemployment and get some money to pay their important bills to keep their lives afloat. The

government helped stimulate jobs by creating government jobs around the country too and

attempting to put some money back into the state governments. Some companies were too big to

let go under, so the government decided to “bailout” a few of them, essentially loaning money

and/or buying their mortgages and assets to them to help them not go under. (Grusky p60) However, the

bailout wasn’t only caused by things that happened in the years leading up to it, some of the

main contributing factors could be tracked back to the 1930s when many investment companies

started to fail. (Shiller p125) Looking at charts of the Federal Reserve Assets, you can see that right in

the middle of 2007 when this all started that they added trillions of dollars to their assets in an

attempt to stabilize the economy, and buy other assets to make sure large companies didn’t fail.

(Bernake p103) These didn’t happen at purely the same time, as there were jobs created and money

started to flow slightly easier they had money to purchase assets. But, even though there were

jobs created and assets bought, the unemployment rate was still astonishingly high in May of

2011, at around 13.9 million people being unemployed. (Grusky p3) While unemployment has fallen to

%4.9 in July of 2016, and the housing market has started to come back to a much better place

than it was 8 years ago when the bubble burst, that doesn’t mean everything is as it was. There

are many people who have lost their careers, and are in jobs that a few years ago would be

considered to be underpaying them. Even though that is the case, this is far from the worst that

could have happened in the long term.

Unsurprisingly, the effects of the Financial Crisis were not only felt in the United States,

but the entire world.

Across Europe a few of the largest financial businesses failed and others

needed a bailout (Shah, Global Financial Crisis) In Iceland, the entire economy changed from mainly

specializing in fishing and aluminum smelting, to specializing in global finance. In this time,

they were offering their business overseas where they could get larger interest rates, causing the

3 largest banks to balloon into a size 10 times greater than their economy. (O’Brien) Unlike in

America, because those banks grew so large the Iceland government couldn’t afford a bail out.

However, the banks only had protections on their own people’s money, so letting them fail just

meant people internationally losing money. While the government did bail out the banks that it

could for the people of its country, that left the government with so little money that it had no

clue but to get a bailout from the International Monetary Fund. When the IMF did help them, it

also helped put in capital controls to stop the Icelandic economy from falling any further. (O’Brien)

There were also many other parts of Europe which went through financial burden, like

Greece;

and other countries like Russia also having problems.

While there has been much more than that that has happened and is still happening, those

are a few of the key reasons I believe that The Great Recession was the most important thing to

happen in the last decade on not only a national level, but also a worldwide level. The effects are

still being felt to this day for many people, including those who were a part of making the bad

financial decisions of their companies.