Effects Of The Bubble Economy On The Economy

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

What does it mean for an economy to be overheated? How does an overheated economy fuel a “bubble”? Are there any bubbles in the U.S. economy today?

In 2007, the U.S. fell into a deep financial recession. One of the main causes of this was the bursting of the housing bubble, which lead to a housing crisis. What is a housing bubble? A housing bubble is defined as “a temporary condition caused by unjustified speculation in the housing market that leads to a rapid increase in real estate prices” (businessdictionary.com 2014). When the bubble bursts, the result is a quick decline in home prices (businessdictionary.com 2014).

You pointed out how the Great Recession also affected the inmate with mental health or substance abuse issues. This is a very important factor because many people including myself, focus on the major hits caused by the Great Recession such as, unemployment and the housing market crisis. The inmate mental health population had many hardships with getting needs addressed prior to the Great Recession. The Recession however, could only have intensified the problem. Inmates are not looked upon as tax paying citizens and their needs are often overlooked or not addressed entirely.

The housing market had started to decline in 2007, after reaching peak prices in 2006. There was an extremely high amount of subprime mortgages that had been issued in the early 2000’s. Homeowners could no longer afford to live in their homes, payments started going to default, and foreclosures started to rise. According to The Washington Post, there were five contributing factors to the housing market crash: low-doc loans, adjustable- rate mortgages, equity line of credit, more money down than needed, and mortgage insurance.

The Business Cycle is “…the "ups and downs" in economic activity, defined in terms of periods of expansion or recession” (Dr. Econ). Expansion is the period in which employment, production, sales and income increase. Likewise, the contrasting contraction is when the actions above decrease. In order to keep track of the fluctuations of the US’s business cycles troughs and peaks, the National Bureau of Economic Research was created. The NBER is comprised of a group of economic researchers currently led by president James Poterba. The members are usually specialized in the field of business-cycle research, and are chosen by the president. The NBER was founded in 1920 as a private non-profit “…non-partisan organization dedicated to conducting economic research and to disseminating research findings among academics, public policy makers, and business professionals.” (http://www.nber.org/info.html). The NBER dating committee was formed in 1978, and plays an important role in the US as an examiner of broad measures of economic activity, and the most reliable source of the beginning and end of recessions in the U.S. This is accomplished by gathering as much data on a given period of economic activity.

In 2008, the US economy entered a period known as the Great Recession. This was primarily the result of banks granting housing loans too freely and at variable rates. When the rates rose too high for the home owner to pay, they forfeited. Then the banks had unpaid loans and houses that they could not sell. This resulted in a chain of events that impacted the banking, insurance and investment industries. The decline in construction and spending resulted in an increase in the unemployment rate to as high as 10% in 2009. This period of Recession was the worst since the Great Depression of the 1920s and 1930s. (Great Recession in the United States. (2011, September 11). In Wikipedia, Retrieved June 20, 2016, from https://en.wikipedia.org/wiki/Great_Recession_in_the_United_States)

The business cycle expands and contracts as the GDP grows or shrinks. The business cycle includes periods of recession and expansion, and peaks and troughs. Although the business cycle can appear to be a volatile up and down movement, the long term movement of real GDP is generally not affected and reaches upward. In an article by Langelett and Schug (2005), the authors discuss how real GDP and business cycle changes are related. A business cycle begins with an expansion where real GDP is rising and reaches the high point or peak of the expansion (Langelett &Schug, 2005). During this time, individuals and businesses feel comfortable with the current state of the economy and begin spending more. A good economy can last many years although, inevitably, the economy will begin to slow. During times of recession, individuals and business feel uneasy about the future and reduce their spending causing the GDP to decline. The GDP is an important measure for voters to comprehend when deciding between candidates and their economic

The following essay will thoroughly examine the severe economic downturn of 2008, formerly known as the housing bubble collapse. We will mainly focus our discussion on the effects the financial crisis had on Canada and the U.S and examine why both countries were affected differently. Although the collapse of the housing bubble is the most identifiable cause, it is extremely difficult to pinpoint one specific defining moment or event triggering the global financial collapse. There are many factors involved, due to the complex nature of the financial systems across the world, and this paper will delve in the key contributing variables that led to this financial crises.

Recession cycles are thought to be a normal part of living in a world of inexact balances between supply and demand. What turns a usually mild and short recession or "ordinary" business cycle into an actual depression is a subject of debate and concern. Scholars have not agreed on the exact causes and their relative importance. The search for causes is closely connected to the question of how to avoid a future depression, and so the political and policy viewpoints of scholars are mixed into the analysis of historic events eight decades ago. The even larger question is whether it was largely a failure on the part of free markets or largely a failure on the part of government efforts to regulate interest rates, curtail widespread bank failures, and control the money supply. Those who believe in a large role for the state in the economy believe it was mostly a failure of the free markets and those who believe in free markets believe it was mostly a failure of government that compounded the problem.

When researching past economic recoveries, the housing market is the one to drive the economy out of recession. That being said, this economic recession hasn’t had much of an impact until recently. America’s housing boom had a tremendous influence on the economy for its low prices and flow of new home construction.

3. Why did influential individuals like Fisher, Keynes and Rockefeller believe that the downturn would only be temporary?

According to Wikipedia a housing bubble is a type of economic bubble that occurs periodically in local or global real estate markets. It is characterized by rapid increases in valuations of real property such as housing until they reach unsustainable levels and then decline. Four years into the housing bubble downturn, much of the country remains hopelessly confused about what happened, why it happened and who is to blame. In my research paper I will try and demonstrate what a housing bubble is, some of the reasons for the bubble, was it preventable, how it kept growing, how it burst and how it has affected our economy.

There are different influences that cause inflation such as energy, food, commodities, and other goods and services. The entire economy is affected by rise of the cost of living. It also affects the cost of operating a business, borrowing money, mortgages, corporate and government bond yields, and every other aspect of the economy. There are several advantages of inflation in the economy. Some include moderate rates of inflation which allows prices to adjust. This is considered a sign of a healthy economy. With economic growth available we usually get a generous amount of inflation. Also moderate inflation rate reduces the actual value of debt. If there is a reduction, the real value of debt increase leads to a squeeze on usuable income.

Timing of the business cycle is not predictable, but its phases seem to be. Many economists site four phases—prosperity, liquidation, depression, and recovery. During a period of prosperity, a rise in production leads to increases in employment, wages, and profits. Obstacles then begin to obstruct further expansion. Production costs can increase, helping create a rise in prices, and