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2000 Recession Research Paper

776 Words4 Pages

The early 2000’s recession was a short lived recession. Even though it was predicted by economists for years, the contraction in the economy was inevitable. One of the most glaring causes of the recession was the collapse of the dot-com bubble. This dot-com bubble was coined as a Tech bubble (Admin). The dot-com bubble was marked by the founding and failure of a group of new internet based companies which referred to as the “dot-coms”. As this new money making wave of the internet swept across the world, companies quickly began to enter into the internet market. These companies saw the internet as a “sort of money multiplying machine” (Carnish).With the Federal Reserve sustaining lower interest rates, it became more attractive to invest in technology start-ups. However, these low interest rates encourage …show more content…

The recession was followed by a weak recovery. Federal government revenue dropped 1.6%, the lowest GDP since 1959. The unemployment rate rose from 4.2 – 6.4%, deficits reached a record of 455 billion dollars (Ginsburg). However, the major effect the 2000-2001 recession had on the US, was the inflation pressures leading to asset bubbles in both the housing market and equity market, which were most of the main causes of the 2008 recession.
During the year 2008, the United States experienced another recession historically known as the Great Recession. The main causes for the 2008 recession was a “snow-ball effect” of the burst of the housing bubble. This housing bubble triggered the government and the banks panic.
The housing bubble was the result of an irrational exuberance in the housing market which led many people to buy houses they could not afford. Low interest rates in 2004 and 2005 helped create this housing bubble. Many investors took advantage of these rates to buy homes just to resell, others bought homes they could not afford due to interest-only loans

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