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The Great Recession Essay

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The 2007-2009 recession, was the longest of its kind since the 1930’s. One thing that’s worth mentioning about “The Great Recession”, as it is sometimes called, is that no one saw it coming. This situation is greatly attributed to the housing bubble burst in 2006-2007. It was wrongly believed that the housing market couldn’t depreciate in value. ”When the long held belief that home prices do not decline turned out to be inaccurate, prices on mortgage-backed securities plunged, prompting large losses for banks and other financial institutions. (Beattie, n.d). The cause of this market crash was that members’ of society, corporations and even foreigners were heavily invested in the housing market with hopes of doubling and even tripling their …show more content…

The Fed was trying its best to keep it under control. In 2008, an increase in inflation was rather noticeable, and was cause of great worry due to the fact that with the unemployment rate of 5.9% it was getting more and more difficult for consumers to purchase goods. The Fed’s monetary policy approaches focused on keeping the interest rate on mortgage loans low, to the point that it was relatively equivalent for someone to get a mortgage loan with similar interest rates as the Fed itself. Moreover, the Fed also started purchasing billions of dollars in long term treasury securities while aiming to sell the same amount in short term treasury securities. All of these monetary policies were focused on reducing long term interest rates. However, interest rates were going to reduce regardless due to the fact that the demand for loans had decreased thanks to unemployment. These policies also caused deflation in 2009 and this deflation is greatly responsible for the whopping 9.4% unemployment rate of that year. Price of goods decreased tremendously because simply put, people didn’t have the means necessary to keep the GDP in constant growth. In figure 2 we can better observe how severely the inflation rate dropped in

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Keeping interest rate low caused the economy to overheat and inflation to sky rocketed out of control. The video talked about the Fed-Treasury Accord of 1951. This act allowed the Federal Reserve to operate independent from the government so it can set the right interest rate. That way it can access economic stability. Since 1951 the Fed has been independent from political pressure

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However, the overproduction was massive and when people were not able to afford to buy more products. As a consequence the production slackened increasing the rate of U.S. unemployment. For this reason, people were not able to afford to pay their bills and debts. The economy was not advancing because people did not have the money to end the surplus and even though the price were dropping really fast and low, people could not manage to pay their debts and buy more products at the same

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Due to the common occurrence of recessions, americans now spend wisely and think about the future for their families (document f) .Unfortunately some baby boomers and caregivers worry about retirement because of the recession's impact on the economy(document e). Banks have now become stable and require a rigorous program on mortgage so they will avoid another downfall. The Great Recession could have been easily been avoided if the government had maintained and organized the economy more efficiently.

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“If you want to understand geology, study earthquakes. If you want to understand the economy, study the Depression” (Ben Bernanke Quotes). Ben Bernanke, a tenured professor at Princeton University, served two terms as the Federal Reserve chairman from 2006-2014 and orchestrated the Fed’s actions during the Great Recession. Being a student of the Great Depression, Mr. Bernanke’s policies and regulations surrounding the late 2000’s crisis reflected the adaptations to the Fed’s failed actions in the 1930’s. Throughout economic history, the stability and health of our economy depends on the balance achieved by the Federal Reserve over their three major roles: Monetary Policy, Regulation, Lender of Last Resort.

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Inflation slows down economic growth, and it 's the cruelest to the poor and also to the elderly and others who live on fixed incomes. And fourth, we must contribute to the strength of the world economy” (Doc G) he stated these principle in his State of Union Address in 1978. When Carter left office, the recession expanded with unemployment numbers reaching 7.5 percent, mortgage rates at 15 percent, and interest rates peaking at an all-time high of 20

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On March 15, 2017, the Federal Reserve has risen its interest rate by 0.25 percent. With this increase, the minimum interest rate that investors demand on their investment increased from 0.75 percent to 1.0 percent. This is the second increase in a span of 3 months, with the previous one occurring during December 2016. With two increases happening so quickly, pulling the interest rate away from zero which occurred during the economic depression of 2008, people finally have more money to spend as the Federal Reserve is increasing borrowing costs. Before December 2016, the economy was growing much more slowly than it is now, as it had been 12 months before the Federal Reserve had increased the interest rate.

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Financial and economic crises are not unfamiliar to the U.S economy, as they almost appeared in a cyclical way at various times throughout the centuries, shaking many times the foundations of the country. Concerning the Great Depression 1929-1933, let us remember that on 29 October 1929, billions of dollars turned into dust. Before the crisis’ years, the market "The Dow" was turning endless of people into millionaires. This kind of market turned into the hobby of many ignorant people who knew nothing about the stock market. When the government entered the “game” trying to calm things down by increasing the interest rate, panic rose.

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Prior to the Great Depression, the Federal Reserve Board was created and in 1913 it was meant to act as a lender to prevent bank failures. It acted as a sort of guard for the banks. In the years before the Stock Market Crash, the Federal Reserve Board made market interest rates and low reserve requirements that were beneficial to large banks. Surprisingly, money was becoming abundant in the US. The Federal Reserve board finally realised they could no longer continue what they had been doing.

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The Great Depression and Great Recession have been known to be the greatest economic crises in the United States. The Great Depression (1929-1939) was a period of drastic economic decline, resulting in the failure of almost half the nation’s banks and the unemployment of several tens of millions of Americans. On the other hand, the Great Recession (2007-2009) was an economic decline, impacting financial markets and resulting in the loss of jobs and homes for millions of Americans. Although the magnitude of the Great Depression was greater by far, comparisons can be made between them. This can allow one to not only enhance their understanding of these catastrophic periods but also the extent to which they were similar.

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During the Great Recession, the unemployment rate was 10%, however today it is only 4.7%. Also, the economy is nearing the Federal Reserve’s goal on inflation of 2% (Long, 2017). This article goes on to say how the Federal Reserve has only had 3 interest rate hikes since the financial crisis. The central bank however, is expected to raise the rates two

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In the spring of 1931, the Federal Reserve began to expand the monetary base, but the expansion was insufficient to offset the deflationary effects of the banking crises. In the spring of 1932, after Congress provided the Federal Reserve with the necessary authority, the Federal Reserve expanded the monetary base aggressively. The policy appeared effective initially, but after a few months the Federal Reserve changed course. A series of political and international shocks hit the economy, and the contraction resumed. Overall, the Fed’s efforts to end the deflation and resuscitate the financial system, while well intentioned and based on the best available information, appear to have been too little and too

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It still happened despite great efforts by the Federal Reserve and Treasury Department to stop the U.S. banking system from collapsing. It led to the Great Recession, when housing prices fell 31.8%, which was even more than during the Depression. Two years after the recession ended, unemployment was still above 9%. The first sign that the economy was in trouble was in 2006 when housing prices started to fall. At the beginning, realtors were happy that prices were dropping.

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966 Words | 4 Pages

Around the 1950’s, the Federal Reserve was devoted to keeping a low interest rate on government bonds after we entered World War II. They did this so the government has the ability to have a less expensive debt funding after the war. In the early 60’s, low inflation was maintained, but in the late 60’s, inflation just kept going upward. Although from 1984-2006, the Fed had some success despite the stock market crash of ’87 and terrorists attacks from 2001.

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1640 Words | 7 Pages

However, the Great Recession was one of the toughest challenges the Fed had seen up to this point. The Great Recession was a global economic downturn that lasted roughly from 2007 to 2009. It was caused by a combination of factors such as: deregulation of the financial industry, the stock market plummeting which erased a wide margin of wealth, the utter collapse of the housing market. It was the Fed's job to find a way to fix the economy. The Federal Reserve responded by lowering interest rates to near zero levels, quantitative easing which involves purchasing large amounts of bonds and other securities to attempt to inject liquidity into the market, and established a wide number of lending facilities to provide credit to financial institutions that were struggling during the crisis.

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758 Words | 4 Pages

Has anyone ever learned about The Great Depression? There are so many details about the Great Depression that we may not know of yet. Everyone learns about this topic in their history class because it had just such a huge impact on the United States today. There is so much to explore about The Great Depression such as, what was the Great Depression, how did it start, what was the Dust Bowl, and what did Franklin Roosevelt do to help end the Great depression?

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