Summary: The 2007 Global Financial Crisis

The 2008 Great Recession helped in restoring economic growth and lowered unemployment. Both fiscal and monetary policies are related ways use to increase the aggregate demand and aggregate supply. So, a shift in the aggregate demand curve to the right is expansionary fiscal policy meaning government spending has to exceed (2012). The G- component aggregate demand help to spend, allowing the C- component of aggregate demand to increase. On the other hand, the monetary policy promotes spending, investments, and lending increasing aggregate demand. During the downturn, the systems concentrate on growing demand total while the supply strategy looked for long-term growth in productivity and efficiency (Pettinger, 2012).

Over the past decade, the Fed has responded fairly to inflation and unemployment. According to the Federal Reserve (2017), between late 2008 (the era of the Great Recession) and October 2014, the Federal Reserve purchased longer-term mortgage-backed securities and notes issued by certain government-sponsored enterprises, as well as longer-term Treasury bonds and notes. In essence, lowering the level of longer-term interest rates and improving financial conditions (the Fed.com, 2017).

The financial crisis that happened during 2007-09 was considered the worst financial crisis in the world since the great depression in the 1930s. It leads to a series of banking failures and also prolonged recession, which have affected millions of Americans and paralyzed the whole financial system. Although it was happened a long time ago, the side effects are still having implications for the economy now. This has become an enormously common topic among economists, hence it plays an extremely important role in the economy. There are many questions that were asked about the financial crisis, one of the most common question that dragged attention was ’’How did the government (Federal Reserve) contributed to the financial crisis?’’

As Wolfers acknowledges in his article, if the economy of the United States enters into a recession, the Federal Reserve System cannot use their usual solution of decreasing interest rates to energize the economy. It is because they already have interest rates set nearly as low as they will go, thus not giving policy makers much room to

hroughout History, our great Nation, the United States of America, went through many era's of financial crises that resulted in depressions. This also happened in 2008, when we experienced an immense financial crisis known as the Great Depression of 2008-2009. In an effort to end the financial crises, the government established three major bailouts: the Emergency Economic Stabilization Act of 2008 (EESA), the Troubled Asset Relief Program (TARP), and the American Recovery and Reinvestment Act (ARRA). Overall, the financial crises of the Great Recession of 2008-2009 caused the government to implement various bail-outs in an attempt to stabilize the economy. These programs have their own advantages and disadvantages that affect individuals and

Just a few days ago, the Federal Reserve increased the federal funds rate from 1.25% to 1.5%. The federal funds rate is one method that the Federal Reserve uses to control monetary policy. The other methods used by the Fed to control monetary policy are open-market operations, and the discount window. The federal funds rate is defined as the interest rate that banks charge each other to lend reserve funds. The federal funds rate is usually than the discount rate so that banks are more inclined to go to other banks first, rather than the Fed. During the recession in 2008, the federal funds rate was near 0 in the hopes that banks would lend more, and the economy would be kickstarted. However, as the effects of the

At the end of the recession from 2001-2004, a period that no economic growth, the Federal Reserve recommend that interest rates stay as low as possible. The idea behind this thought was that lower interest rates would attract people to investment in housing, business loans and other areas of economic growth. The idea worked, as more and more potential homeowners entered the market, brought in by the perception that they could afford to pay monthly mortgage rates. However, in 2004, the price of oil started to rise, and the Fed responded by gradually increasing interest rates (Beese, 2008).

Our economy is a machine that is ran by humans. A machine can only be as good as the person who makes it. This makes our economy susceptible to human error. A couple years ago the United States faced one of the greatest financial crisis since the Great Depression, which was the Great Recession. The Great Recession was a severe economic downturn that occurred in 2008 following the burst of the housing market. The government tried passing bills to see if anything would help it from becoming another Great Depression. Trying to aid the government was the Federal Reserve. The Federal Reserve went through a couple strategies in order to help the economy recover. The Federal Reserve provided three major strategies to start moving the economy in a better direction. The first strategy was primarily focused on the central bank’s role of the lender of last resort. The second strategy was meant to provide provision of liquidity directly to borrowers and investors in key credit markets. The last strategy was for the Federal Reserve to expand its open market operations to support the credit markets still working, as well as trying to push long term interest rates down. Since time has passed on since the Great Recession it has been a long road. In this essay we will take a time to reflect on these strategies to see how they helped.

This chapter is about the background of 2007-2008 financial crisis. The 2007-2008 financial crisis has a huge impact on US banking system and how the banks operate and how they are regulated after the financial turmoil. This financial crisis started with difficulty of rolling over asset backed commercial papers in the summer of 2007 due to uncertainty on the liquidity of mortgage backed securities and questions about the soundness of banks and non-bank financial institutes when interest rate continued to go up at a faster pace since 2004. In March 2008 the second wave of liquidity loss occurred after US government decided to bailout Bear Stearns and some commercial banks, then other financial institutions took it as a warning of financial difficulty of their peers. In the meantime banks started hoarding cash and reserve instead of lending out to fellow banks and corporations. The third wave of credit crunch which eventually brought down US financial system and spread over the globe was Lehman Brother’s bankruptcy in August 2008. Many major commercial banks in US held structured products and commercial papers of Lehman Brother, as a result, they suffered a great loss as Lehman Brother went into insolvency. This panic of bank insolvency caused loss of liquidity in both commercial paper market and inter-bank market. Still banks were reluctant to turn to US government or Federal Reserve as this kind of action might indicate delicacy of

In Harper Lee’s To Kill a Mockingbird, an unjust society is working to imprison a wrongfully convicted African-American, apart from a few citizens and lawyers yearning for a ‘just’ conclusion to the case of Tom Robinson. This novel encourages the reader to admire Tom Robinson for his determination to help someone in need, regardless of the black/white divide that has brought him scrutiny. It also persuades the reader to pity Tom, because of the sad, yet inevitable end to the case. Tom was “… a dead man the minute Mayella … screamed.” It can also be noted that the reader should admire Atticus, for his willingness and determination to help Tom in his case, although, he knew it would never be possible to save him from his inevitable end.

Monetary policy effects the GDP inflation. “Between 1996 and 2000, real GDP in the United States expanded briskly and the price level rose only slowly. The economy experienced neither significant unemployment nor inflation. Some observes felt that the United States had entered a “new ear” in which business cycle was dead. But that wishful thinking came to an end in March 2001, when the economy entered its ninth recession since 1950. Since 1970, real GDP has declined in the United States in five periods: 1973-1975, 1980, 1981-1982, 1990-1991 and

Success of the Fed during the recession can also be explained by the fact that policymakers` were able to avoid spiraling inflation. Blanchard (1996) describes spiraling inflation as a situation when inflation becomes worse because of the interactive relationship between wages and prices. In other words, spiraling inflation occurs when increase in wages leads to increase in prices, and, increase in prices leads to even higher wages. Taking into consideration the fact that the U.S economy suffered from supply shocks, spiraling inflation was a possible outcome. To prevent the economy from such an “illness”, the Fed opted for responding to inflation more aggressively by adjusting rate of interest. Figure 5 provides response of federal funds rate to a 1-percentage point increase in core inflation (Mankiw, 2001). What we see is that in 1960s, 1970s, 1980s federal funds rate was less responsive to increase in core inflation when compared to that of 1990s. As a result, monetary policy in 1990s

“Religion in Nineteenth-Century America” written by Grant Wacker, is the second section in the book Religion in American Life: A Shorty History by authors Jon Butler, Grant Wacker, and Randall Balmer. Grant Wacker, is a professor of Christian History at Duke Divinity School who is considered an expert in the field. This work presents the religious climate of the nineteenth century in America. Wacker sets out to inform his readers about the everchanging religious climate that occupied the people and society of America. In these stories, Wacker illustrates the many changes surrounding the religious culture by the people, society, and government in America. The major argument of this work suggests “as the eighteenth-century slipped into the nineteenth, thousands of Americans drifted from traditional Christianity simply because it no longer met their needs”. Moreover, Wacker implies “that in the nineteenth-century many Americans, of diverse religious heritages, looked steadily and creatively to the past to find resources for the present and hope for the future”. In this case, the population of America found ways to redirect their focus on and understood the importance of reinventing or reforming the ideals of the past to reflect their needs of the present for its people and society as a whole. “Religion in Nineteenth-Century America” emphasized that religion remained central to some people and its society throughout the past, yet continued through the nineteenth century. While

In mainly everything, sports, class rooms, or work places you have a set of rules to go by. In the accounting world, you must also follow a set of rules and standards. The Generally Accepted Accounting Principles (GAAP) or the International Financial Reporting Standards (IFRS). Most countries around the world use IFRS while the United States uses GAAP. International Financial Reporting Standards and Generally Accepted Accounting Principles do things differently. Each country’s government sets which principles the accountants will use. There are also organizations that have been formed to help with all the confusion between countries. The organizations are called Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB). FASB is the organization that has been designed by the US government to establish GAAP in the United States. IASB is the international organization developing and promoting accounting standards to be used throughout the world.

Because of the extreme severity of the Great Recession in 2008, western central banks have since applied a series of unconventional monetary policies besides normal ones. One of the characteristics of the unconventional policies is the intended near-to-zero interest rates, so those policies are also named Zero Interest Rate Policies (ZIRP). ZIRP are designed to help the financial market escape from the “liquidity trap”, a situation in which normal expansionary monetary policies fail to decrease interest rates below zero and thus become ineffective. Without a doubt, ZIRP are necessary tools for policymakers to intervene in the financial catastrophe of 2008; however, even though the recession has officially ended in June 2009, ZIRP are still in effect now. The application of ZIRP in the US demonstrates the necessity of the Federal Reserve (FED) for both monetary and fiscal policies in the regulatory system. However, ZIRP are in fact encouraging institutions and individuals to seek risks rather than avoid them, and the accumulating dangers as a result make ZIRP necessary to protect the financial market and the US Treasury from greater destruction. Therefore, people are trapped in a downward spiral, and the exit and economic recovery are postponed.