The financial crisis of 2008 was estimated to be the most dangerous since the Great Depression of the 1930’s (The financial crisis, 2009). The catalyst was the 2007 bubble burst of the housing market which spread quickly to the US financial sector and ultimately affected the global economy. The American auto industry was devastated by this crisis. Detroit’s big 3 companies Ford, Chrysler and GM’s had their debt problems exposed as a result. Increased debt and lower cash flows forced the automotive giants to seek solutions that would allow them to remain a viable entity in the coming years. For GM the bills came in while cash flows decreased. This created an insolvent situation by which they could not recover. This forced the U.S. and Canadian governments to step in and assist with GM’s bailout/bankruptcy proceedings in 2009 ("A giant falls," 2009).
The ripple effect of the automotive melt down moved to the surrounding communities. Detroit its communities were hit very hard. These communities are heavily reliant on automotive and the complementary raw materials produced. When the big 3 were in an insolvent situation Detroit’s communities began to crumble. This lead Detroit to declare bankruptcy July 18, 2013 ("Key dates in," 2014). Although, the automotive companies have slowly recovered Detroit has yet to emerge from Chapter 11. Plans are still being evaluated, questioned and finalized ("Key dates in," 2014). In an attempt to resolve their insolvent situation Detroit is proposing to cut pensions and jobs. This coupled with the decimation of Detroit’s housing markets continues to perpetuate their financial problems (Niraj, 2014).
As domestic problems continued to manife...
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Robbins, A., & Robbins, G. (2001, October 10). What's the most potent way to stimulate the economy?. Institute for Policy Innovation Issue Brief. Retrieved from http://www.ipi.org/ipi_issues/detail/whats-the-most-potent-way-to-stimulate-the-economy
Niraj, C. (2014, February 22). Detroit’s bankruptcy plan slashes some pensions by a third. The Washington Post. Retrieved from http://www.washingtonpost.com/blogs/govbeat/wp/2014/02/22/detroits-bankruptcy-plan-slashes-some-pensions-by-a-third/
The financial crisis of 2008: Year in review 2008. In (2009).Encyclopeaedia Britannica. Retrieved from http://www.britannica.com/EBchecked/topic/1484264/The-Financial-Crisis-of-2008-Year-In-Review-2008
Zandi, M. (2009). The Economic Impact of a $750 Billion Fiscal Stimulus Package Retrieved from http://www.martincountydemocrats.org/2009/docs_articles/economicstimulus010609.pdf
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