The crisis was specifically characterized by accumulating debt levels and extremely high structural deficits of the government. Unfortunately, the Great Recession left a weakened banking sector that has already recorded huge capital losses. The strong relationship between the survival of many Europeans government and their financial stability prompted the government to bail out banks that were badly affected by the Great Recession (Obstfeld et al 2009, 480-486). Thus, the banking sector is obviously in a very weak condition to intervene in the
This means that when the credit crunch struck banks were forced to reduce the amount of money they lend to people. This was due to a huge amount of “bad debts”. In other words people started to borrow too much and couldn’t repay it back. Anup Shah, from the Global Issues website says: “The global financial crisis, brewing for a while, really started to show its effects in the middle of 2007 and into 2008. Around the world stock markets have fallen, large financial institutions have collapsed or been bought out, and governments in even the wealthiest nations have had to come up with rescue packages to bail out their financial systems.
Right now in America, we are in an economic crisis that is slowly tearing the seams that holds the country’s banking system together. This ‘recession’ affects everyone from single families to giant corporations because of the nature of the crisis. It began slowly, and is now moving quicker and quicker, with no apparent end in sight. It seems that everyone in America played their part in a tedious game that only took a matter of time to come crashing down around all of us. This crisis began to happen in 2007 when the rate of sub-prime mortgages and lending skyrocketed because of a bubble in the housing market.
The high price of cheap foods was the main topic of the Americans’ conversation. Pollan said, “For 50 or 60 years, we have let ourselves believe that as long as we have money we will have food. This is a mistake. If we continue our offenses against the land and the labor by which we are fed, the food supply will decline, and we will have a problem far more complex than the failure of our paper economy. The government will bring forth no food by providing hundreds of billions of dollars to the agribusiness corporations.” He mentioned the phrase “paper economy”.
In the wake of the 2007 financial crisis many policymakers were bypassing many of the traditional lending procedures in an effort to keep the economy afloat. "A moral hazard is where one party is responsible for the interests of another, but has an incentive to put his or her own interests first." (Bordo, 2008) In the particular interest of the 2007 financial crisis, a number of key historical events occurred which led investment firms to push the boundaries of acceptable risk. Further aggravated by a lack of policy and control coupled with fresh financial products that diluted risk promising high return that were being created overnight without proper understanding. In particular we saw moral hazard come from a number of sources: 1.
Some tribute neoliberalism for the booming economy of the 90’s, while others maintain it is to blame for the 2008 recession. In the 80’s the financial sector became less regulated, this gave the sector more freedom, and allowed for more financial innovations. Deregulation caused irresponsible lending, massive lending caused problems such as price shocks to be absorbed. Therefore the effects of the price shocks were not seen right away. Internationalization skyrocketed after industrialization faded away.
A total war requires money. This is accomplished in several ways, most of which affect every American citizen. Corporations stop making their regular products to manufacture goods needed for war. The government provided loans, but generally only the biggest corporations received them. This forced many small businesses to fail because they couldn’t compete.
The unsuccessful attempt to pass a strong enough stimulus package in 2008, the battles to continue unemployment benefits, the debt ceiling that impacted fiscal austerity when government should be investing in the economy, this corruption in our politics has done huge amount of pain in the average, 99 % of hard working Americans. According to our House Majority Leader Eric Cantor “there is too much spending that the United States is doing”. The recent bill passed by President Obama “The American Jobs Act” gave us only a quick hopeful mindset of policy debate before it, too, vanished in the take-no-prisoners
This is because GM does not have other choice, so GM need government bailout and only government bailout loan could save it. Due to the risk of bankruptcy was growing daily, the bank refuse to loan GM company money, GM will bankrupt if GM does not get the bailout loan from government. Therefore, the bailout is the only way to save GM Company. Although at last GM fill for bankruptcy, but before that government will provide fund to the company through Trouble Asset Relief Program (TARP). Without TARP, GM company will out of business, many people will lost their job, then many families will loss income for daily expenses; the company like auto part supplier who depend on GM in business also will go bankruptcy; this will bring a big implication to economic.
Around August of 2007, banks become afraid to loan money out due to the fact that they did not want to suffer from losing money yet again. “This led to the $700 billion bailout, and bankruptcies or government nationalization of Bear Stearns, AIG, Fannie Mae, Freddie Mac, IndyMac Bank, and Washington Mutual. By December 2008, employment was declining faster than in the 2001 recession.”(useconomy.com). With so many foreclosures on houses, many americans were either homeless, or had bought a cheap apartment to keep them from being homeless. Because of the recession, and bad economic, many Americans have no jobs, and barely have a house.