Recession Essay

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The Bureau of Labor Statistics characterizes a recession as a general slowdown in economic activity, a downturn in the business cycle, and a reduction in the amount of goods and services produced and sold. But what usually causes this slowdown to begin with? Each recession has its own specific causes, but all of them are usually preceded by a period of irrational exuberance which is part of the expansion phase of the business cycle. The most recent one, which officially lasted from December 2007 to June 2009, produced the greatest US labor-market meltdown since the Great Depression. This Great Recession began with the bursting of an 8 trillion dollar housing bubble. Irrational exuberance in the housing market led many people to buy houses they couldn’t afford because the thought was that housing prices could only go up. The bubble burst in 2006 as housing prices started to decline, threw many homeowners off guard, who had taken loans with little money down. When the realization set in that they would lose money by selling the house for less than their mortgage, they foreclosed. This triggered an enormous foreclosure rate which caused many banks and hedge funds to panic after realizing the looming huge losses due to the buying of mortgage-backed securities on the secondary market. By August 2007, banks were afraid to lend to one another because they did not want these toxic loans as collateral. 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. Consumer spending experienced sharp cutbacks due to the resulting loss of wealth. The combination of this along with the financial market chaos elicited by the bursting of th...

... middle of paper ... to work again on a regular basis. There are also a number of special rules, called “work incentives,” that provide continued benefits and health care coverage to help you make the transition back to work. If you are receiving Social Security disability benefits when you reach full retirement age, your disability benefits automatically convert to retirement benefits, but the amount remains the same. In most cases, people will continue to receive benefits as long as you are disabled. However, there are certain circumstances that may change your continuing eligibility for disability benefits. For example, your health may improve to the point where you are no longer disabled; or like many people, would like to go back to work rather than depend on disability benefits. The law requires the review of cases from time to time to verify that people are still disabled.
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