...The Great Recession and the Great Depression John Maynard Keynes wrote in the depths of the Great Depression that, “Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.”1 This acute observation is applicable to our current Great Recession as well. In fact, the newly discredited ideas are not too different from the old, suggesting that Keynes may have overestimated the ability of people to learn from their mistakes. I discuss the parallels between these two watersheds in recent economic history in three steps. The first and most important step is the causes of the crises and their relation to economic theory. The second step is the spread of the crises as they affected the whole world. I close with the final step, recovery—at least as far as we can see it at this point. Marx said famously that history repeats itself, “the first time as tragedy, the second as farce.”2 I argue that this observation also fits our current condition. Both of these dramatic and costly economic crises came from the interaction of economic imbalances in the world economy and the ruling ideology of financial decision makers who confronted these imbalances. The first imbalance came from the First World War. This paroxysm of violence brought the long economic expansion of the nineteenth century to a sudden end. Britain, the workshop of the prewar world, was exhausted by the struggle. America, the rising...
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...The Great Recession negatively affected Millenials in that after graduating college they are entering into a competitive job market that has high levels of unemployment. The Pew Research Center noted that, as a result of The Great Recession, Millennials were hit harder on the job front when compared with other age groups. Furthermore, many Millennials are graduating college with a large amount of student loan debt. After graduation, many Millennials move back in with their parents so that they can pay their loans down and save money for a house. Due to their desire for economic stability prior to marriage and a family, the median age for first time marriage has risen to 27 for women and 29 for men (Murphy). This is significantly higher when compared to my generation where the median age for marriage was 22 for women and 25 for men....
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...WEEK 3 ASSIGNMENT: THE GREAT RECESSION JONATHAN MOONEY MARCH 24, 2013 MBA 510: ECONOMICS Most economists consider the Great Recession of 2008 to be the worst financial crisis since the Great Depression. The sequence of economic events affected the entire global economy, with certain countries being hit harder than others. In the end, the collapse resulted in the total collapse of large financial institutions, the bailout of banks by national governments, and downturns in stock markets around the world. The housing market also suffered, resulting in evictions, foreclosures and prolonged unemployment. The crisis played a significant role in the failure of key businesses, declines in consumer wealth estimated in trillions of US dollars, and a downturn in economic activity leading to a global recession and contributing to the European sovereign-debt crisis. Most experts agree that one of the most important contributors to the recession was the collapse of the housing bubble. This led to an extremely high rate of loan defaults for people who probably should not have been given those loans in the first place. Due to the practice of predatory lending, many unsuspecting people were offered mortgages that they could not afford; however these people were convinced by lenders and realtors that they would be able to refinance those properties in a year or two and make tons of money. Since, the housing market was strong at the time, many people jumped on this opportunity,...
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...This assignment´s main objective is to clarify the Great Recession, it´s causes and consequences. Then, it will be highlighted the possible relation between the actual crisis and one(s) of the “killer apps” listed by Neil Fergunson, a British Historian known by his provocative and controversial views. Many economics acknowledge the Great Recession to be the most devastating global economic crisis since the Great Depression in the 30´s. This crisis is based on some factors, worth to be emphasized, such as easy credit conditions that encouraged high risk lending and borrowing practices; international trade imbalances; the housing bubbles; the fiscal policy choices by the governments, related to their revenues and expenses or the position taken by some federal reserve banks, especially on the bailing out process of financial institutions. The first cause we can appoint it’s related to the risk or actual bankruptcy of the major financial institutions globally, starting with the collapse of the “Lehman Brothers” (September 2008), a global financial services firm. Some of these kinds of institutions highly invested in risky securities, which depreciate almost their entire value, when United States and European housing bubbles began to deflate during the 2007-2009 period. Consequently, as share and housing prices decreased, a major panic was installed on the inter-bank loan market, resulting on the failure of many others large and well established investment and commercial...
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...THE GREAT RECESSION Anthony Pellegrino March, 2014 The Great Recession and Economic Policy Abstract The most recent Great Recession (GR), including the events which led to it, the policies which followed it and the slow recovery after it have been a topic of debate and inquiry since it began in 2008 and ended in 2009. The purpose of this thesis is to portray those events from the perspective of a 21-year-old economics student in 2014. I, that student, will recount the events which are portrayed as the official cause(s) of the GR, accounting for alternative theories. Then I will examine the policy responses by the Federal Reserve (Fed) and the US Federal government and analyze some historical talking points regarding the GR from multiple sources. Following that, I will explain the effects of policy responses, confront the possibility that responses only served to mask the symptoms instead of removing the cause, and try to explain the atypical slow recovery that we’re currently experiencing. I will list the sectors which were affected by the GR chronologically, beginning with the housing market, and include those presently experiencing the effects and those likely to suffer in the future. I will include, where relevant, common misconceptions about the GR. Finally, I will conclude by offering alternative explanations for the GR and alternative potential policy responses. This item will synchronize with my final judgment of whether we’re on the right track or if the worst has yet...
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...Introduction The U.S. economy is currently experiencing its worst crisis since the Great Depression. The crisis started in the home mortgage market, especially the market for so-called “subprime” mortgages, and is now spreading beyond subprime to prime mortgages, commercial real estate, corporate junk bonds, and other forms of debt. Total losses of U.S. banks could reach as high as one-third of the total bank capital. The crisis has led to a sharp reduction in bank lending, which in turn is causing a severe recession in the U.S. economy. This article analyzes the underlying causes of the current crisis, estimates how bad the crisis is likely to be, and discusses the government economic policies pursued so far (by both the Fed and Congress) to deal with the crisis. Housing Bubble Homeownership, (realtors) argue, is a way to achieve the American dream, save on taxes, and earn a solid investment return all at the same time. It's now clear that people who chose renting over buying in the last two years made the right move. In much of the country, recent homebuyers have faced higher monthly costs than renters, and have lost money on their investment in the meantime. Today, many homeowners are in up side down mortgages, meaning the purchasers owe more on their homes than what it is actually worth. In countless cases, it can be said that money has been thrown away, an insult once reserved for renters. Throughout the bubble period there was little if any mention...
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...activity as measured by GDP .The great economic depression of the US from 1929-1939 was one of the worst economic depressions in the world economy. The GDP per capita of the United States fell by a third (Federico 2005). A lot of economic activities went down and so many people suffered. Even though the depression affect the rest of the world, it has been called the great depression of the US because it’s believed that the US suffered more than any other nation and the causes are also attributed to have been started in America. Many things have been attributed to have caused the great depression among them are bank failure, Stock Market Crash of 1929, Reduction in Purchasing Across the Board, American Economic Policy with Europe, Drought Conditions but many people believe that it’s the American economic policies that really caused the depression and entirely blame the government for that. Some of the effects are increase in unemployment, collapse of banks and increase in the cost of living. On the other hand the economic recession of 2008 was longest recession since the world war two hence the term great recession. The recession lasted for 18 months from December 2007 to June 2009. Various things have been attributed to have cause the recession among them are irrational excitement in the housing market and low interest rates while some of the effects are increase in unemployment, increase in oil prices, decrease in consumption and investment. Recessions are declared by the national...
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...The Great Depression of 1929 compared to the Great Recession that Started in 2007 The Great Depression and The Great Recession were similar in some ways, but were different in several ways. There are many differences of opinion in regards to which one was worse, and who sustained the most damage. Some believe when Obama took over is his first year of office, he faced the worst economic situation in January 2009. Although, there are reports that Roosevelt faced a severe economic situation when he took office in February of 1933. Franklin D. Roosevelt took office in February of 1933, in which the country was in the Great Depression that started in 1929. It has been said that the Depression lasted 10 years, and started on a per say, “Black Thursday.” This was when millions of dollars in stock sold in one day. This caused prices to fall 23%, and caused the stock market, “to crash.” This started the downward spiral, with businesses closing, people losing jobs, and then people losing their homes. Farmers lost their farms and unemployment was as high as 25%. People were unable to survive, but when Roosevelt took over he passed several bills to help the economy. The FED implemented the reserves a short time prior to the Depression starting. They followed as some say tight monetary policies. These policies caused the banks to not be able to lend due to the high interest rates. People were unable to afford the higher interest, and this caused the money supply (which keeps the economy...
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...Running Head: THE IMPACT OF THE GREAT RECESSION Counter Measures of The Great Recession XX XXX ECON102 I003 Macroeconomics 26 Jan 2013 Top of Form [pic][pic][pic][pic] Bottom of Form What is the economic meaning of a recession? As stated by Claessens and Kose (2009) “There is no official definition of recession, but there is general recognition that the term refers to a period of decline in economic activity” (para. 2). A sequence of events must take place in order to create a recession. The U.S. having the largest economy in the world is obviously not immune to the effects of a recession. The Great Recession is proof of this, as the support structure began to fail. The support structure of the economy is the stock market, housing market, and job markets. As each in its own way began to fail so did the U.S. economy as a whole. The U.S. government used fiscal policies to attempt to stabilize the economy. Fiscal policies include an increase government spending and at the same time reduce taxes. The objectives of the fiscal policies are used to create a boost in the economy. A decrease in taxes means an increase in personal disposable income. The increase in income will lead to an increase in private spending. The country’s consumer spending leads to an increase in aggregate demand which increases the Gross Domestic Product (GDP). The overall goal is to begin the process...
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...America’s most recent recession was from December 2007 through June of 2009. A recession is a period of economic decline, one of the most recognized indicators of how an economy is performing is the unemployment rate. Leading up to this recession the unemployment rate had been at or less than 5% for 30 months in a row. In October 2009 the unemployment rate had risen to 10% the last time the unemployment rate had been that high was in 1982. Another way to see how the economy is doing is real gross domestic product which is the output of goods and services produced by labor and property in the United States. Looking at real GDP in the 2nd quarter of 2009 GDP decreased by .7% which is much better compared to the 1st quarter where GDP decreased...
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...“The Great Recession of 2007 - Housing slump” Dino J. Ramirez Economics Mr. Dan Botich 12/3/2012 In 2007, the new housing market fell by 26 percent which was the largest decline in almost 50 years. In this report I will discuss the rise and fall of the housing market, which has been considered by many economists the “worst housing crash in U.S. history.” I will also tell how and when the housing bubble began, what factors allowed it to continue and what finally caused it to “pop”. I will then explain what regions of the U.S. where affected the most along with what demographic groups were affected the most by the crash. The housing bubble began to grow when the housing market had steady growth from 1995 to 1999. In about 2000, there was the stock market crash and many investors that had money invested in the stock market began to worry about their money and wanted a better investment so the investors began to put their money in the housing market instead of the risky stock market. During this time there were plenty of cheap new loans available that was put in place (due to the stock market not doing well) in an attempt to help out the economy. The housing market was used to help get the economy back on track by creating wealth and providing an asset that people could borrow money from. There were many types of “creative” type loans such as: • Adjustable interest loans, which are interest-only mortgages, are for borrowers who have a good reason...
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...This article explains how The Great Recession is still troubling college graduated and high school graduated. Explaining that the economy is continuing to be a failing system for those who graduate with bachelors. The article also mentions why this issue is important and what can be done to help decrease the recession that is still occurring. Their findings are not just economics, the authors also point out the inequality between gender and race for those unemployed graduates. Explaining unfortunate realities that women get paid less and that African Americans and Hispanics have lower employment rates compared to Caucasian decent. This is an article found on Google.com sites:edu it is a reliable source that mentions a whole heap of information...
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...Therefore, that’s when an examination of Detroit’s economic rebirth comes into play due to investments by big companies and small startups (business management), the increase of government spending on local matters (economics), and a boost in productivity of labor force. For years Detroit has been trying to build its economy back, to try and make this city as economically powerful as it should be. The Great Recession has destroyed many cities in America, but no city has suffered as much as Detroit. When the automobile companies declared bankruptcy, it created complete chaos for the people and investors who once trusted the city. As a result of this, the majority of people saw Detroit as a lost cause and viewed the city as an economic wasteland but regardless, Detroit never gave up. The auto industry has attained back its health, the Motor City is slowly crawling its way back from a near death economic experience to rebirth as a imperative business hub. It all started in 1950 when almost “1.85 million of people”(Padnani, Amy, December 8, 2013) moved into Detroit. The Big Three automobile companies had settled in, creating a vast amount of new jobs...
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...Great Depression vs Great Recession It’s an exaggeration to believe that the Great recession was even remotely as devastating as the Great Depression. There may be some minuscule similarities, however the differences outweigh are clear. The Great depression lasted a decade while the Great recession’s duration was only 2 years. Unemployment spiked out at 25% during the Great depression and remained in double digits for a decade, whereas throughout the most recent recession unemployment topped off at 9,5%. Also, unlike the Great Depression Americans received government help in the form of unemployment checks, insurance, and food stamps when they were unemployed. Industrial production decreased by 50% during the Great depression, versus 15% during the Great recession. Nine thousand banks close throughout the depression, but only 400 closed through the recession. Times were far more harsh living through the depression than the recession, especially when the government is not helping you. When comparing the two economic downfalls, there aren’t many similarities. Both time periods were preceded by positive economic growth. Prior to the depression the growth rate was 4.4%, and prior to the most recent recession the growth rate was 3.2%. Both eras were followed by much more dependency on the Federal Reserve for times of crisis. When comparing the two economic collapses the Great depression was obviously worse than the Great recession, and the differences were more magnified than...
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...TheGlobal Business Environment – Fall 2013 Homework 1: The Great Recession and “The West and the Rest” Expose your narrative on the Great Recession. Do you see a relation with a possible bug(s) in one or more of the six killer applications listed by Ferguson? Write a 1-page essay, single line, 12pt, in your best English. Global Business Environment – Fall 2013 Homework 1: The Great Recession and “The West and the Rest” One of the apps Ferguson suggests as having propelled Western Civilization over the rest is consumerism. This analysis begins with what I believe to be a bug in this app. Consumerism is mentioned by Ferguson as a tool which enabled Westerners to express their individuality, opinions, and ideas. Though this begins with jeans and pop music, the true importance of this app greatly exceeds...
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