The Great Recession

A recession is full-proof sign of declined activity within the economic environment. Many economists generally define the attributes of a recession are two consecutive quarters with declining GDP. Many factors contribute to an economy's fall into a recession, but the major cause argued is inflation. As individuals or even businesses try to cut costs and spending this causes GDP to decline, unemployment rate can rise due to less spending which can be one of the combined factors when an economy falls into a recession. Inflation is the general rise in prices of goods and services over a period of time. Inflation can happen for reasons such as higher energy and production costs and that includes governmental debt.

According to Investopedia.com, “A recession is a significant decline in activity across the economy, lasting longer than a few months. It is visible in industrial production, employment, real income and wholesale-retail trade. The technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country's gross domestic product (GDP); although the National Bureau of Economic Research (NBER) does not necessarily need to see this occur to call a recession.” Fiscal policy is the use of government spending and taxation to try to influence the economy. This is done many times in an attempt to prevent a recession or at a minimum, to try to stabilize the economy. Monetary policy is the central bank, currency

economy that persists to this day. The housing market was the primary cause of the recession

Several factors lead to the 2008 financial crisis. The 1999 repeal of the Glass-Steagall Act effectively removed the separation between investment banks and depository banks in the United States. Credit rating agencies failed to price the risk involved with mortgage-related financial products accurately. The Government, concerned with not performing economically as well as the Clinton administration believed increasing home ownership was the answer and reduced obstacles (like loan income/debt documentation). The world 's insurance companies began insuring mortgage instruments. Excessive investment leverage, especially in the Banks and venture capitalist communities. And the Government did not adjust their regulatory practices to address 21st-century financial markets- especially in credit default swaps (CDS). These factors set the stage for disaster and greedy speculators wanting to short the housing market triggered it by systematically exposing the mortgage risks to the world.

The Great Recession is possibly the worst economic times since the Great Depression after World War Two. Freddie Mac and Fannie Mae were two financial institutions that played a major role in the uprising of housing prices. Bundling home loans with different ratings together helped to get a good deal. There was money to be made with investors. When greed took over and good ratings were given to people for loans that they could never pay them back, there then was a shift in direction. The housing market started to fall. Houses were too expensive, and people could not afford it. Foreclosures were happening all over the country, which lowered the worth of the houses in neighborhoods that were paid up to date where families still lived. The Federal Government had to step in because the housing bubble busted, and then financial institutions and banks went bankrupt.

A recession would cause the production possibilities frontier to shift inward. This would depict a decrease in the economic growth, because a recession is a time when the economy of a country is not advancing, but declining. There isn’t much trade during a recession and there is a decline in the activity between different industries. This would cause the need/want of particular goods and services to decrease. This would decrease the amount of production for that good, or service, because there would be less consumption of the product.

There are number of issues which are believed to be the reason behind the home mortgage market crisis that occurred in 2008. Firstly the “housing bubble”, the home mortgage market problem which our economy is suffering from right now. It started with the “bursting” of the U.S. housing bubble which started in 2001 and reached its highest in 2005. The

Although the impacts of other recessions (1990 and 2001) varied from those above, the overall performance remained positive during and following these declines. The 2007-09 recession was different in that performance during the decline was actually negative, not just a lower positive number than pre-recession years. Since the 2007-09 recession marks the most substantial and radical of the last three recessions, it follows that the economy has been very slow to recover. The usual spike in spending upon the end of the recession was not seen in 2010 as some economists may have expected.

The Global Recession of 2007-2009 also considered as the “Great Recession”, which officially lasted from December 2007 to June 2009, was the worst recession that have happened since the Second World War. European countries as Greece, Germany, and Spain were the most affected. All of them believed in the implantation of “Austerity measures”, set of policies with the ambition of reducing government budget deficit by cutting expenditures, increasing taxes or a mixture of both. Governments reacted to the eurozone debt crisis and Great Recession in different ways. One pattern is that expenditures of government rose and taxes fell from 2007-2009, and that the reverse took place from 2010-2012.

The financial crisis of 2008/2009 was the most serious economic decline since 1929. This paper will discuss a few of the causes of the crisis, the role the Federal Reserve played in connection with the three main economic goals, and will then describe traditional and non-traditional measures taken to stimulate the economy. Finally, this essay will relate the government to our present day economic environment and explain why some economists say that the United States is experiencing a “new normal.”

Over the past few years our country and the rest of the world has experienced an economic crisis. For the United States, it’s been one of the worst economic recessions since the Great Depression during the 1930’s. The recession was caused by many downfalls but the majority was caused by the collapse of the housing market.

Throughout 2008 major financial corporations became insolvent. The first institution to be eliminated was Countrywide Financial Corp. Not only were they the first major corporation to go, but they were America’s largest mortgage lender. In January of 2008, they were bought out by Bank of America, for fractions of Countrywide’s market value just a few months prior. The next bankruptcy came from Bear Stearns, who had acquired a large amount of mortgaged backed securities. The bankruptcy filing was followed by JPMorgan Chase purchasing Bear Sterns at roughly $1.2 billion, with Bear Stearns having assets valued at up to $30

Financial crisis can be profoundly described in the example of the subprime financial crisis in the US. It includes causes and preconditions along with steps and options to rectify the situation, which makes it substantial for understanding the nature and consequences of most financial crises. This article is oriented on revealing the key reasons of economic downfall, ways to avoid or mitigate the situation, and the role of a business analyst in the situations of possible or factual crises.

According to Frederic S. Mishkin (2010) from Columbia University or the National Bureau of Economic Research. This report analyzes what changes, financial distribution fluent, but quite simply become full-grown financial crisis. The financial crisis of 2007 to 2009 can be divided into two different levels. The first, more limited, said from August 2007 to August 2008 arising from the loss of one, relatively small segment of the US financial system - ie, subprime residential mortgages. When the French bank BNP Paribas suspended redemption of shares held in money market funds. Damage in the US housing prices have reached a climax around the year 2005. This resulted in a decrease in housing prices, mortgage securities collected and sold bonds

There are many reasons why the financial crisis of 2008 occurred, many blame the faulty mortgages as the primary issue, it is one component that led to a deeper problem. These are some of the issues that formed the crisis and affected people domestically and internationally. The imprudent mortgage lending was an issue. Behind a backdrop of plentiful credit, increase in housing prices as well as low interest rates, loaning standards were undisturbed to a point where people were buying houses they couldn’t actually afford. As prices began to plummet and loans began to decay there was a severe halt to the US financial system. The housing bubble was another issue that contributed to the crisis. There were such easy monetary policies that the Federal Reserve allowed prices to rise to an unbelievable level. Another huge problem was off-balance sheet finance. Banks created