Fiscal and Monetary Policy Before During and After the “Great Recession” of 2008

Decent Essays

One of the most interesting facets of The Great Recession of 2008 is that it didn’t really begin in 2008. The fiscal and monetary policy that prompted what we know now as the Great Recession of 2008 really began in 2006 and 2007. What was happening then and why did it take so long for the nation to feel the recession? The answers to those questions explain a great deal about how the Federal Reserve Bank operates and how the different ideologies of economics affect our nation (Sumner, 2011).
In 2006 the largest housing bubble we have seen in the past 50 years burst and in December 2007 the recession began. The recession would last for roughly 18 months, officially. However, some economists and citizens would argue that it lasted much …show more content…

Had the Fed kept to one school of thought instead of vacillating between predictions of doom and gloom and then back again to all is well our nation might have bounced back more quickly from the burst bubble and the recession (Lowrey, 2014). It is this vacillation and “wait and see” attitude that clouds many economists’ thinking. Most of the time making small adjustments to the market and waiting it out is okay, but when things start to fall apart some vision is needed to spur the Fed into action and prevent another crisis. According to Mark Thoma at The Fiscal Times:
Fiscal policymakers in Congress deserve more blame and scorn than they have received for their poor response to the recession. Congress failed to implement a fiscal stabilization package that was large enough to address the big problems the economy was facing … the initial package was too small in both size and duration (Thoma, 2013) The empirical evidence is there and now there is no excuse for our nation to ever suffer a great recession or great depression again. So what can our nation do to prevent or avoid another economic disaster? There are six things the Fed can do to prevent another recession:
1. Cut interest rates: Cutting interest rates help to boost aggregate demand
2. Preventing home repossessions: Freezing mortgage rates could help prevent foreclosures
3. Expansionary Fiscal Policy: Tax cuts and higher government spending on capital investment projects.
4. Devaluation: A

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