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Understanding the Economic Recession in America Essay

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The economic recession of the late 2000s has been called the greatest economic downturn our country has faced since the Great Depression. American businesses and banks are failing, foreclosures are spreading like wildfire, and unemployment numbers have reached double digits. Under our current president, many are optimistic, but many others are fearful for the future. Economists have different speculations regarding the causes of the “Great Recession”. Some blame it on higher prices for necessities like oil. Others blame the recession on the burst of the real-estate bubble, inflation, and lacking government regulations on big businesses. Economic experts are also debating on possible solution to end the recession. It is evident that the…show more content…
As the housing bubble burst, credit was tightened and fewer loans were distributed. These two events, along with the global price expansion, helped create a ripple effect that furthered the economic turmoil. The credit “squeeze” lowered demand of products from businesses, which led to a decrease in their profits. As revenues decreased, businesses closed down many of their plants and facilities in order to reduce costs. The closures of these plants led to layoffs of millions of workers, and finally, a sharp decline in the US stock market (“What Caused the Recession?”). Although the instability of sub-prime mortgages, the credit crunch, and the expansion of global prices heralded the advent of the economic crisis, other experts have had their own opinions about the cause of the financial meltdown. Adam Smith’s “invisible hand” and the American “pursuit of self-interest” played a large role on the onset of the recession. The invisible hand is an economic theory developed b Adam Smith, a pioneer in world economics. The theory is that as consumers buy products, companies will adjust their prices and product distributions to fit the needs of the consumers, thus resulting in mutual satisfaction between businesses and buyers (“Adam Smith and the invisible hand”). However, as the economy grew strong during the pre-recession years, American consumers became more influenced by greed. They
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