Cause Of The Great Recession Of 2008

First, we need to understand how the Great Recession occurred. It all started with President Ronald Reagan in the 1980s. Reagan was famous for his supply-side economic views (Amadeo 1). He used top-down economics meaning he used government intervention to give businesses tax breaks and subsidies to create economic growth. With this he also started a continuing phenomenon to deregulate Wall Street. He believed this would create vast economic growth and it did. But it created a bubble and it

The recession of 2008 is also called the ‘Great Recession’, said to have begun in December 2007, and took a turn for the worse in September 2008, and it was a severe economic problem expanded globally. This recession affected the world economy, and is said to have been the worst financial disaster since the Great Depression. The decline in the Dow Jones this time was -53.8%. Since the official start of the recession in December 2007, and through June 2010 there have been about 2.3 million homes foreclosed in the United States. In 2012, the state with the most foreclosures in January alone was California, with 51,584 houses being repossessed. Unemployment during this collapse was 8.5%, and continued to increase to about 10% as of 2010. People’s reaction to this recession was a huge decrease in spending and borrowing from banks, but an increase in saving.

In the midst of the current economic downturn, dubbed the “Great Recession”, it is natural to look for one, singular entity or person to blame. Managers of large banks, professional investors and federal regulators have all been named as potential creators of the recession, with varying degrees of guilt. No matter who is to blame, the fallout from the mistakes that were made that led to the current crisis is clear. According to the Bureau of Labor Statistics, the current unemployment rate is 9.7%, with 9.3 million Americans out of work (Bureau of Labor Statistics). Compared to a normal economic rate of two or three percent, it is clear that the decisions of one group of people have had a profound affect on the lives of millions of

In August 1929, the peak of the stock market boom, the unemployment rate in the United States was only about three percent. By the end of 1933, the unemployment rate was a staggering twenty-five percent. Over thirteen million people lost their jobs during these years. To put those figures into perspective, the unemployment rate during the recent Great Recession reached only ten percent at its peak in October 2009! Starting in 1930, consumers stopped purchasing goods as they had in the past. Either they didn’t have the money, or they were afraid to spend in fear that the money would be needed more urgently later. The decline in consumer spending further exacerbated the Great Depression because fewer people were buying things. Manufacturing companies did not need to produce as much as they had before, leading to a reduction in the work force. As people lost their jobs, they were unable to keep up with payments for items bought on credit before the financial crisis. The vicious cycle continued from

The major causes of the Recession and the Great Depression were the actions of the federal government. Before the Great Depression, the Federal Reserve kept interest rates low in the 1920s and raised interest rates in the early 1930’s. President Hoover’s regulations damaged trade and American exports throughout the 1930s. Finally, the President signed a large tax increase into law in 1932, which hurt businesses and affected everyone.

2007-2009 in America has often been described as the worst economic crisis since the Great Depression in 1929. There was lots of debate whether the economy was slipping back to double dip recession but there is considerable evidence that the economic crisis in 2008 is worse than the crisis in 1930s. I will examine the cause of depression in 1930s and the relationship between the Great Depression and the Great Recession in 2008 comparing their similarities and differences of their facts and various aspects of America.

The Great Recession that began in 2007 introduced people to a feeling not since felt since the Great Depression of the 30’s and 40’s. It reintroduced a new generation to the realization that we cannot take anything for granted. It sprung up fears in a fearless population, and out of it born a stress like no other. We can harness that stress; we own it as individuals, employees, as employers, as caretakers of the future.

The Great Recession inflicted abundant harm in the U.S. and global economy; 8.7 million jobs vanished (Center on Budget), 9.3 million Americans lost their homes (Kusisto), and the U.S. GDP fell below what the economy was capable to produce (Center on Budget). The financial crisis was unforeseen by millions and few predicted that the market would enter a recession. Due to the impact that the recession had, several studies have been conducted in order to determine what caused the recession and if it could have been prevented. Government intervention played a key role in the crisis by providing the bailout money that saved those “Too Big to Fail” institutions. Due to the amount of money invested in the bailout and the damage that the financial crisis had on the U.S. population, “Too Big to Fail Banks”, and financial regulation are two of the biggest focuses of the presidential candidates. Politicians might assure voters that change will occur, but is it to late for change to be efficient, are the financial institutions making the same mistakes that led to the financial crisis?

History helped to recognize the parallels between these eras and learn from them. The crisis of 2008 was not nearly as bad as the Great Depression, but like the Depression consumers lost trust in the market and were afraid to invest in the economy. The Housing Crash catastrophe, like the Great Depression contributed to the failure of banking institutions and led to high unemployment rates. Unlike the Great Depression, the crisis of 2008 was supported by more than a dozen economic stimulus packages provided by the federal government to jumpstart the economy. The federal government stepped in to bailout the banking institutions to avoid another Great Depression. It is important to look back on the history of these two national devastations and learn from their mistakes so we can be better prepared for future economic downfalls in the

The economic meaning of a recession is that the gross Domestic Product (GDP) has declined for two or more consecutive quarters. Unemployment rises, housing falls, stocks fall and the economy is in trouble. Whenever the government sees that the economy is entering a recession it is important for it to act. The U.S acted in two ways during the Great recession of 2008 through fiscal and monetary policies. Renaud Fillieule identifies that “ Monetary and credit expansions have been the main tools used by the U.S. government and central bank to try and recover economically from the Great Recession of 2008” (Fillieule r, Pg. 99 2016). These Keynesian policies are debatable among economist, none the less they were implemented and put the U.S on the road to recovery.

The great recession of 2008 affected everyone around the world. The great Recession is considered the second worst economic crisis in American history, behind the Great Depression.

The Great recession in 2008 was the worst recession since the Great Depression. The bursting of an eight trillion dollar housing bubble started it but at the same time lead to a loss in business investment. It was also caused by a stock market crash and bad loan that caused many people to lose some of their family wealth dramatically. The Great Depression had a four percent fall in domestic gross product and the unemployment rose to ten percent. The Great Recession also leads to the largest expansion and a two-thirds tax cut.

The year 2008 saw a repeat of the great Depression of the 1930’s characterized largely by volatility in stock prices caused by the sub prime mortgage disaster. The aftermath saw Multi national companies crumbling and billionaires turning to paupers overnight . None of the Major economies from America, China, Japan, Germany and France were immune

This recession has been the biggest economic struggle in my lifetime. Everything that could go wrong went wrong. The event that led to this recession is the housing crisis, where banks were giving out loans, almost without any restrictions. People were getting involved in one of the best economic times in our history. Confidence was everywhere and the ideal mindset hit everyone. When the economy hit all new highs, people thought the supply and demand chain would continuously rise. The business cycle seemed to be a lie to many Americans. However, the business cycle is real and the world lives a part of it everyday. When deregulation became extreme and private companies, especially banks, got all the power, nothing could stop them

In 2008, the US experienced the traumatic chaos of a financial downturn, whose effects rippled throughout Europe and Asia. Many economists consider it the worst crisis since the Great Depression, and its alarming results are still seen today, a long six years later. Truly, the recession’s daunting size and formidable wake have left no one untouched and can only beg the question: could it have been prevented? The causes are manifold, but can be found substantially rooted in illogical investments and greedy schemes.