Great Recession - Wikipedia. This article is about the global economic downturn during the early 2. For background on financial market events dating from 2. Financial crisis of 2. The scale and timing of the recession varied from country to country. The Great Recession has resulted in the scarcity of valuable assets in the market economy and the collapse of the financial sector in the world economy. Under the academic definition, the recession ended in the United States in June or July 2. The seasonally adjusted PPP. National Bureau of Economic Research (the official arbiter of U. S. Many of these securities were backed by subprime mortgages, which collapsed in value when the U. The Great Recession was a period of general economic decline observed in world markets during the late 2000s and early 2010s. The scale and timing of the recession varied from country to country. In terms of overall impact. S. With loan losses mounting and the fall of Lehman Brothers on 1. September 2. 00. 8, a major panic broke out on the inter- bank loan market. There was the equivalent of a bank run on the shadow banking system, resulting in many large and well established investment and commercial banks in the United States and Europe suffering huge losses and even facing bankruptcy, resulting in massive public financial assistance (government bailouts). The recession has renewed interest in Keynesian economic ideas on how to combat recessionary conditions. Economists advise that the stimulus should be withdrawn as soon as the economies recover enough to . Central banks' gold reserves: $0. M0 (paper money): $3. Torrentz will always love you. The Shed Ender looks at four Chelsea players who must rediscover their early-season form to help the Blues strengthen their grip on the Premier League title. E-Mail Alerts: Get Updates On Articles & Videos: CLICK to Sign Up for Alerts Tax-Deductible Donations: Brother Nathanael Foundation is a 501(c)(3) Non-Profit Organization. Causes of the United States housing bubble; Credit rating agencies and the subprime crisis; Government policies and the subprime mortgage crisis; Causes of the Great Recession. TurboBit.net provides unlimited and fast file cloud storage that enables you to securely share and access files online. Traditional (fractional reserve) banking assets: $3. Shadow banking assets: $6. Other assets: $2. Bail- out money (early 2. Panel reports. Financial Crisis Inquiry Commission, composed of six Democratic and four Republican appointees, reported its findings in January 2. One of them, signed by three Republican appointees, concluded that there were multiple causes. In his separate dissent to the majority and minority opinions of the FCIC, Commissioner Peter J. Wallison of the American Enterprise Institute (AEI) primarily blamed U. S. At the same time, weak underwriting standards, unsound risk management practices, increasingly complex and opaque financial products, and consequent excessive leverage combined to create vulnerabilities in the system. Policy- makers, regulators and supervisors, in some advanced countries, did not adequately appreciate and address the risks building up in financial markets, keep pace with financial innovation, or take into account the systemic ramifications of domestic regulatory actions. Four such narratives include: There was the equivalent of a bank run on the shadow banking system, which includes investment banks and other non- depository financial entities. This system had grown to rival the depository system in scale yet was not subject to the same regulatory safeguards. Its failure disrupted the flow of credit to consumers and corporations. When it burst, private residential investment (i. GDP and consumption enabled by bubble- generated housing wealth also slowed. This created a gap in annual demand (GDP) of nearly $1 trillion. Consumers began paying off debt, which reduces their consumption, slowing down the economy for an extended period while debt levels are reduced. Further, this greater share of income flowing to the top increased the political power of business interests, who used that power to deregulate or limit regulation of the shadow banking system. That deficit was financed by inflows of foreign savings, in particular from East Asia and the Middle East. Much of that money went into dodgy mortgages to buy overvalued houses, and the financial crisis was the result. This pool of fixed income savings increased from around $3. NPR explained this money came from various sources, . China, India, Abu Dhabi, Saudi Arabia made a lot of money and banked it. In the U. S., mortgage funding was unusually decentralised, opaque, and competitive, and it is believed that competition between lenders for revenue and market share contributed to declining underwriting standards and risky lending. USA household debt as a percentage of annual disposable personal income was 1. High private debt levels also impact growth by making recessions deeper and the following recovery weaker. In advanced economies, during the five years preceding 2. In Denmark, Iceland, Ireland, the Netherlands, and Norway, debt peaked at more than 2. A surge in household debt to historic highs also occurred in emerging economies such as Estonia, Hungary, Latvia, and Lithuania. The concurrent boom in both house prices and the stock market meant that household debt relative to assets held broadly stable, which masked households. When house prices declined, ushering in the global financial crisis, many households saw their wealth shrink relative to their debt, and, with less income and more unemployment, found it harder to meet mortgage payments. By the end of 2. 01. Ireland, 2. 9% in Iceland, 2. Spain and the United States, and 2. Denmark. Household defaults, underwater mortgages (where the loan balance exceeds the house value), foreclosures, and fire sales are now endemic to a number of economies. Household deleveraging by paying off debts or defaulting on them has begun in some countries. It has been most pronounced in the United States, where about two- thirds of the debt reduction reflects defaults. A 2. 00. 9 paper identifies twelve economists and commentators who, between 2. United States. Federal Reserve Chairman Alan Greenspan said in mid- 2. The legislation gave HUD the power to set future requirements, and eventually (under the Bush Administration) a 5. In 2. 00. 1, the independent research company, Graham Fisher & Company, stated: . They contend that lenders relaxed lending standards in an effort to meet CRA commitments, and they note that publicly announced CRA loan commitments were massive, totaling $4. This is analogous to allowing many persons to buy insurance on the same house. Speculators that bought CDS protection were betting that significant mortgage security defaults would occur, while the sellers (such as AIG) bet they would not. An unlimited amount could be wagered on the same housing- related securities, provided buyers and sellers of the CDS could be found. Several sources have noted the failure of the US government to supervise or even require transparency of the financial instruments known as derivatives. Born, head of the Commodity Futures Trading Commission, put forth a policy paper asking for feedback from regulators, lobbyists, legislators on the question of whether derivatives should be reported, sold through a central facility, or whether capital requirements should be required of their buyers. Greenspan, Rubin, and Levitt pressured her to withdraw the paper and Greenspan persuaded Congress to pass a resolution preventing CFTC from regulating derivatives for another six months . Influential figures should have proclaimed a simple rule: anything that does what a bank does, anything that has to be rescued in crises the way banks are, should be regulated like a bank. The investment banks were not subject to the more stringent regulations applied to depository banks. These failures exacerbated the instability in the global financial system. The remaining two investment banks, Morgan Stanley and Goldman Sachs, potentially facing failure, opted to become commercial banks, thereby subjecting themselves to more stringent regulation but receiving access to credit via the Federal Reserve. AIG was contractually required to post additional collateral with many creditors and counter- parties, touching off controversy when over $1. U. S. While this money was legally owed to the banks by AIG (under agreements made via credit default swaps purchased from AIG by the institutions), a number of Congressmen and media members expressed outrage that taxpayer money was used to bail out banks. In the earlier episodes, depositors ran to their banks and demanded cash in exchange for their checking accounts. Unable to meet those demands, the banking system became insolvent. The current panic involved financial firms . Yet, over the past 3. Key components of the market . We had a 2. 1st- century financial system with 1. For example, Ravi Batra argues that growing inequality of financial capitalism produces speculative bubbles that burst and result in depression and major political changes. They argue that such a reshaping should include new advances within feminist economics and ecological economics that take as their starting point the socially responsible, sensible and accountable subject in creating an economy and economic theories that fully acknowledge care for each other as well as the planet. By definition, the three balances must net to zero. Changes in Employment for Selected Time Periods. U. S. A 2. 01. 1 poll found that more than half of all Americans thought that the U. S. GDP remained only a little over 4. CBO projected that GDP would not return to its potential level until 2. By the final quarter of 2. US GDP had grown by 1. Canada, the United States' largest trading partner by then, had a GDP of $1. Both countries now have the fastest growing economies within the G8 and G2. Billion in 2. 01. Billion in 2. 01. The unemployment rate rose from 5% in 2. March 2. 01. 3. Non- residential investment (mainly business purchases of capital equipment) peaked at $1,7. Stock prices began a steady climb thereafter and returned to record levels by April 2. It began to recover thereafter and was $6. Q3 2. 01. 2. The weak economic performance since 2. The middle class dropped from 6. The share for the middle class dropped to 4. Since the number of poor increased during this period the smaller piece of the pie (down to 9% from 1. The younger generation, which would be just starting their wealth accumulation, has been the most hard hit. Those under 3. 5 are 6. In 2. 00. 9, the wealthiest 2. The top 1% controlled 3. The last time median household income was at this level was in 1. Between 2. 00. 0 and 2. Source Data: Eurostat. Relationship between fiscal tightening (austerity) in Eurozone countries with their GDP growth rate, 2.
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