U.S. Economic Crisis

871 Words4 Pages
The United States is currently experiencing the biggest financial crisis after the Great Depression, in this paper we will discuss what caused the current economic crisis and why? Two What is the relationship between mortgages, the housing crisis and Wall Street? Third, how has this crisis affected fiscal policy and what are some of the drawbacks of government intervention. Four, what is the recession doing to GDP, economic growth and inflation and how are other countries faring. Five, discuss the different types of unemployment and why is underemployment becoming an economic issue and lastly, what should be done to get the economy back into expansion mode. One main factor that caused the current economic crisis started from the real estate market, focusing on subprime mortgages and lenders that loaned money to high risk borrowers. In which, that led to the whole real estate bubble to bust due to the U.S Market thanks to the securitization and the supply response of financial assets to the demand of such assets according to stock-market investors.com. The relationship between mortgages, the housing crisis and Wall Street were the excess capital globally pushed an enormous amount of money into the U.S mortgage market, so then the idea of generating higher returns originated. Mortgages were now offered at a high mortgage rate to borrowers. The decline in housing prices led to rising defaults among subprime and ALT A borrowers, borrowers with adjustable –rate mortgages, and borrowers who had made only small down payments, many investors on Wall Street refused to buy mortgages backed securities that led to this financial crisis. As an example large financial firms, including Bear Stearns, Merrill ... ... middle of paper ... ...ither in summer or winter depending on the country).Unemployment and Underemployment are related issues but each measures a separate category of works, Unemployed works have no job. Underemployment however, involves underutilization of a working individual’s skills or ability for example a loan manager or a lawyer working at MacDonald’s. This becomes a economic issue due to the fact that less people are working and not spending. At this time the economy is at its worst since the great depression the government needs to make drastic cuts with spending and stop importing cheaper goods. Many other countries have started to make cut backs to their economy with less people working and Americans are now forced to accept new tighter credit environment and work less hours and business struggle to adapt to lower levels of consumer spending.
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