Examples Of Economic Downturn

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Economic Downturn in 2007/08
Economic stability is a critical factor in a country because it is one of the key drivers towards development. Many countries strive to stabilize their economies through proper leadership and having peace in their countries. War is one of the things that may affect the economy of a country significantly and may even result to depressions that are of great extents. The great depression and the World War II are considered to represent tough times that the Americans have experienced over the years. Several economic downturns have been experienced in the world over time, but two of them have been seen to have significantly impacted both the world’s economy as well as the economy of the US (Nabli). The great depression
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These policies are usually put in place to ensure that a countries economy does not find itself in a recession as well as under inflation. The government through its agencies uses the policies to ensure that economic stability is attained. The Federal Reserve’s are responsible for controlling the flow of money, and this is essential in ensuring that the economy is stable. According to reports and especially findings by the US Financial Crisis Inquiry Commission, the recession as it happened was avoidable. The report also provided some of the cause that it saw were responsible for the crisis. These include; dramatic breakdowns of corporate governance inclusive of poor or rather reckless acts by the financial firms with regards to taking too much risk, excessive borrowing and risk by Wall Street and households which brought economic systems to a collision course with the crisis (Riccardo Bellofiore). Also, financial regulation failures inclusive of Federal Reserve’s failure as far as it was concerned by mortgages, ill preparations by key policy makers with relations to the crisis, and systematic breaches when it came to ethics and accountability at all levels contributed to the recession. The great recession came about as a result of different factors acting together thus leading to the economic …show more content…
The US especially was seen to have been profoundly affected when it came to matters relating to mortgages. The mortgage funding in the country was seen to be competitive, decentralized, and opaque. The high competition that was experienced by lenders with regards to market share and revenue were seen to be contributive towards risky lendings and declining underwritings. The Federal Reserve is also to blame for the recession, and this was brought about by the measures that were put forward by its chairman at the time Alan Greenspan. One of the actions that he took that was seen to have brought about the recession is the lowering of the Federal funds rate to 1%. The reduction of the rates according to economists led to the injection of massive amounts of easy credit based money into the financial system (Atif Mian). The increase of money into the financial system usually results to an economic boom. Apart from this, Greenspan has also been seen to have acted in a way that would have fuelled the economy into a recession. He tried to recover the country from the initial recession that it had experienced in 2000, and his actions to deal with the recession did not provide a permanent solution but was instead seen to be a postponement of the

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