The Great Recession: The Worst Tragedy

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The Great Recession, known as the worst tragedy that has happened to the United States’ economy ever since the Great Depression back in the 1920s, occurred between 2007 through 2009. According to Investopedia, the definition of recession is defined as, “ a significant decline in activity across the economy, lasting longer than a few months.” In December 2007, the United States noticed its first sign of being in a state of recession when the Gross Domestic Product (GDP) per cita had decrease for two consecutive quarters. The Great Recession, December 2007 through June 2009 marks an unstable 18 months for the United States’ economy. There is countless amounts of people will not ever forget this tragic period for middle to lower class families. …show more content…

The Federal Reserve banks interest rates went 6.5% to as low one percent. This decision was made by federal chairman, Allen Greenspan, to ensure that the economy would stay strong for more years to come, but would later find out his plans backfired. The one percent low interest rates made it more appealing to Americans to take out more loans, they would most likely struggle paying back. These people are consider as risky business decisions and labeled in the housing market as unrated. In addition, the one percent interest rates also made homebuyers and investors run to the banks for huge loans. The home buyers wanted huge loans to open spread open their budget for options on homes. The investor wanted big loans to make bigger profits off their investments. So at the time most people wanted to take full advantages of these low interest rates or this so called cheap money. The banks being so greedy at this time, they gave out loans to risky people who are close or borderline accepted. This low interest rates encouraged home buyers to purchased houses. So this caused a shift in the demand curve to increase, homebuilders were force to build houses to keep up with demand. However the demand increase to due to the low interest rates were not a true reflection on the housing market. Many critics and politician called this mistake by the Federal Reserve the housing bubble lax. After banks noticed home price was increasing due to increase of demand, they didn’t feel so comfortable any more handing out loans. They also noticed that some of their risky loans were hurting them when people couldn’t afford or didn’t pay them back. So all the major banks decided they would stop giving out loans and began to apply for

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