Shanee Angol
Cathy Forshee
Economics 1
October 10,2018
The Great Recession 2008-2013
The United States economy seems to be in the shadows of the Great Recession. The great recession was known to be a sharp economic decline which took place in the year 2008 december and ended in the month of june 2009, but the ongoing effects still affects many countries like the United States Of America. A recession is a slow down in the economic activities in a geographic region. The economic turndown of the great recession was the largest since world war two took place. When the global crisis exploded into flames it slowed down economic expansion in every state.
The crisis was severe, the financial effects were greatly outnumbered than any other financial crisis ever. Since the great recession has been the most deadliest crisis, the key measures of the economic activities it attacked and slowed down were gross domestic product (GDP), income, employment, industrial production and retail levels
Their were many factors that affected the great recession directly and indirectly but one of the reasons, it began after the 2007-2008 global credit crunch and led to a prolonged period of lower growth and rising unemployment . The credit crunch is a sharp reduction in the accessible of money from banks and other source of lenders. The credit crunch led to a huge drop in bank lending due to the scarcity of liquidity. In the year 2008 all the major economics witnessed a very sharp downturn in real (GDP) which dropped to 4.3 percent from it's peak in 2007 to it's tough in 2009. Bad loans generated to the great recession, in the time leading up to the credit crunch more banks became more aggressive and took much more risks especially American Banks in giving and lending credit. Because of this these bad loans was sold onto other financial places around the world in countries like the United KingDom, Europeans bought these mortgage bundles from the United States.The banks started losing increase and it became more difficult to borrow money on money markets. The bad loans caused the banks to reduce loans and mortgages. These banks were losing large amounts of cash and it became a challenge to give credit and liquidity.
Due to these bad activities people were left with mortgages they couldn't pay and many home owners had large mortgages they had to pay in a short period of time.The Great Recession also happened because of the housing Bubble bursting. The housing bubble was a high rise in housing generated by demand,speculation and exuberance. The financial crisis began in spite of the 8 trillion dollar housing bubble. There were many cost and benefit seen as the dollar floated during the 1980’s as well as China fixed currency in 2009. The United States dollar backing the European dollar contributed factors of establishing the environment which the United States housing bubble formed and eventually popped.
There were loads of events that went wrong with the saving and loaning crisis in the United states. (LCM) Long Term Capital Management began and ended during the 1990’s. This firm was the largest hedge funds in the United States who employed strategic ideas which included pairs trading and statistical arbitrage. These were used to unite high leverage, this firm borrowed yen and gold an example of The Monetary Policy. They failed, this fiscal drama showed much consequences. When wall street imploded the more mortgage broke things and securitizations passed too much money into buying building and home the standards of credit began to fall rapidly. The poor people and lower class where the main victims in this economic crisis.Dept grew rapidly among lenders with low credit scores, the rate of debt income grew by 80 % from 2000 to 2006 for the bottom 60% of the score spread and doubled for those who were in the bottom 20%. The households prices fell approximately 13 percent,The net worth of theses households in the United States and the non-profit organization fell from an approximate amount of 69 trillion dollar.
The booming of housing made banks and households financially vulnerable, 16 percent fuel rapidly increased in mortgage debt. According to the article more than 25 percent of housing declined and the downturn in stock prices also contributed further to the high in the house raito. The States of Florida and California faced shaper downfall in the house prices and an increase in households leverage than the national average.According to the article Social Security disability (SSDI) rose during the recession. During the recession the losses of jobs were unbelievable between that start of the crisis, in December 2007 8.7 Million jobs were lost between this period of time. The unemployment rate was higher than in the previous recession and is faster than the depression 1981-82 recession.
In December the national unemployment rate was at 5.0 percent where it had been for the past 30 months but in October 2009 the rate quickly switched to 9.5 percent. Months after it continued increasing till it got to a percentage of 10.0, the only time unemployment was ever as high as 10.0 percent was in the earlier years of September 1982 through june 1983. The rate of employment for hispanics and black african had been higher than the rate for the whites months at the beginning of the recession and after the crisis theses rates for the latinos and the black african american remained above.Over the years the unemployment rate for men were generally lower than women during and between recessions but higher unemployment on the men's side was notable immediately after the recession. From place to place the rate varied North dakota, South Dakota and Nebraska hat the lower monthly unemployment 5.2% among the 50 states. California and Michigan had the highest jobless rate above. In most countries the United States unemployment rate was higher than some countries and also low than most others before the beginning of the recent crisis.
At the of the 2008 recession the United States unemployment rate went higher than more industrialized countries and stayed so, months following this recent crisis.According to the Article 3 months after the recession the private sector faced a total of 235,000 establishment deaths and 172,000 establishment births. During the recession in 2009 china succeeded to keep their economy growing at rate of 8.5 percent. The economy was supported by the bug stimulus package put together by the authorities of the chineses with the package amount of $585 billion dollar.Although it didn't affect china to extreme content 45 drop in it exports.Past president Barack Obama remarked that since the great recession is the greatest economic crisis since the great depression both the causes of the great recession and the great depression actions was in the hands of the federal government.
In time of the great depression the federal reserve kept interest rates relatively low in the 1920’s then raised interest rates in 1929 to halut the resulting boom. The president hoover signed into the sky high smoot hawley tariff that started stifling trade and started damaging American exports throughout the 1930’s. In 1932 the president then signed another large tax which paused entrepreneurship. the great recession seed were sewed when in 1990’s the government kept pushing home ownership for people who were uncreditworthy. As of today the United States of America and the rest of the economy is five years away from the great recession.The united states economy has grown since. A milestone has been achieved for the country with All the jobs which was lost after the crisis 8.7 millions jobs have now been regained. The economy still suffers from such a financial crisis but as the years go by the economy is slowly creeping to what is needed “A full Force recovery”.