Causes Of The Great Recession

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The Great Recession began in December of 2007 and continued through 2010. This all began with the bursting of the housing bubble. The resulting loss of wealth led to sharp cutbacks in consumer spending. This loss of consumption, along with the financial market chaos triggered by the bursting of the bubble, also led to a collapse in business investments. As consumer spending and business investments dried up, massive job loss followed. In 2008 and 2009, the U.S. labor market lost millions of jobs. This was the most dramatic employment contraction of any recession since the Great Depression. This proved to be a defining moment in American financial history. There were many things that brought about the Great Recession of 2008 I was able …show more content…
These loans compiled and grew; this doubled the amount of money and debt in the economy. With the debts that the banks built-up, housing prices began to rise and the bubble began to grow as well. As homeowners lose equity, it forces a cutback in spending as they can no longer take out second mortgages. ("11 Things That Can Cause a Recession.”) Over time, this caused foreclosures. This was the initial trigger that set off the Great Recession, but for different reasons. Eventually the loans that the banks offered needed to be payed and with the large amount accumulated along with mark ups on housing prices many people were unable to repay their loans. There was also the mass unemployment spike that leads to a constant rise from 2009 through 2011. The employment decline experienced during the December 2007–June 2009 recession was greater than that of any recession of recent decades. According to an article on the Bureau of Labor Statistics, 47 months after the start of the recession that began in November 1973, for example, employment was more than 7 percent higher than it had been when the recession started. In contrast, 47 months after the start of the most recent recession (November 2011), employment was still over 4 percent lower than when the recession …show more content…
Recovery efforts have been put into place to prevent the recession from happening again. In thinking about how to avoid another crisis of this sort, one point to recognize early is that something like stimulus spending, which generally does not work in any case, is not a long-run prevention strategy but a way of dealing with the short-run symptoms of a prior crash. How best to promote, or not interfere with, recovery from a recession is a very different question from how one prevents the disease from returning. If we think of the Great Recession as a heart attack, the first problem is treating the immediate problem and symptoms. Cutting interest rates should help to boost aggregate demand. Amongst other things, lower interest rates reduce mortgage interest payments, giving consumers more disposable income. Lower interest rates also encourage firms and consumers to spend more rather than save. As well as cutting base rates, the monetary authorities could try and reduce other interest rates in the economy, the Central Bank could buy government bonds or mortgage securities. Buying these bonds causes lower interest rates and helps to boost spending in the economy. One idea I came across while looking into this topic is taxing the

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