The Recession Of The United States And United Kingdom

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The Great Recession of 2007-2012, of which several countries are still recovering, including the United States and United Kingdom, shows great similarity to the Japanese Recession of the 1990s. However, by taking a closer look and identifying the causes of both we become aware of the differences that make them not so similar after all. The Great Recession had a domino effect beginning in the United States with the fault of subprime mortgages creating a housing bubble. Whereas Japan’s fault lies with the increasing land prices due to investment, in which created a land bubble that eventually would burst. With the United States and Japan holding high ranks on the Top 10 Exporters in 2014, United States 2nd and Japan 4th, a recession shows…show more content…
The risk was extremely high due to the possibility that the loan would never be paid back. During the 2000s a housing price bubble was beginning to form within the United States. This was due to those who before could not own a house, suddenly being able to due to subprime mortgages. Prices rose 90% from 2000 to 2006 (Ueda, 2012) showing a rapid increase in housing prices and therefor increasing the amount further of those who would never be able to pay their mortgage back. This caused great financial pressure within the United States economy when the federal reserve raised interest rates within the United States in February 2007.This meant that debts were not being paid by subprime mortgage holders resulting in the collapse of the subprime mortgage market in mid 2007. A prime example of this is the largest sub prime lender firm within the United States, New Century Financial. New Century Financial filled for bankruptcy on the 2nd of April 2007. The collapse came with a cut of roughly 3,200 jobs. (Treanor, 2007) The collapse of the subprime market meant that the housing boom within United States and United Kingdom came to an end and burst the housing bubble within the United States. (Arestis, Sobreira, and Oreiro, 2010) However, this did not stop the spread of the subprime mortgage. In the United Kingdom, Bank Northern Rock began to target sub-prime customers. Northern
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