Most people are in debt, in late 2005 “wage growth was shortchanged because 46 percent of the growth of total income in the corporate sector was distributed as corporate profits, far more than 20 percent in previous periods.”(24) Household income had fallen five years in a row and was 4 percent lower. The average wages of Americans are low. The growth of the American population is expanding very rapidly; the job count compared to population growth is almost unrealistic. Only one point nine percent more jobs have come up since the beginning of the last recession. The unemployment rate is four point six percent That means that a lot of people do not have jobs; the percent of people that have a job was one point three percent, So that means that more people are not working than people with a job.
By 2008, due to the failures of large financial institutions, there were severe liquidity problems within the US banking system. When the housing bubble peaked in late 2007 the values of securities linked to U.S. real estate pricing began to plummet (Stiglitz 55). This was a critical hit to financial institutions across the globe. Questions began to arise amongst consumers and members of government alike in regards to the solvency of banks due to poorly performing loans and mortgages, which in turn led to declines in the availability of credit. The complete loss of investor confidence impacted stock markets globally.
As a nation, our economy is declining so less money is circulating through the system. Therefor many people have lost their job and can’t provide for their family. When our countries economy started to collapse in 2008, many businesses went under and many houses were foreclosed. During that time we had a nine trillion dollar debt deficet. Now we have a seventeen trillion dollar debt deficit and we are wasting more food and material items now than we ever have.
The Nasdaq has fallen nearly 56% from its peak in March of 2000. The Wilshire 5000, which is a broader market, is also down by about 22%. Also a factor in dropping consumer confidence is the fear of more layoffs by major employers. The media has paid a lot of attention to large layoffs of companies, yet the labor markets still remain fairly tight. The natural rate of unemployment in the US is approximately 5%, which is higher than the actual rate... ... middle of paper ... ...ints on congress never materialized.
To even begin to think about possible solutions to the current state of the economy, one must first understand the origin of our problems. We are in a recession today because of a weak job market, risky mortgages, and a heavy reliance on faulty financial formulas in the stock market. For many people, it seems to be harder to get a job now than ever before. These feelings are well supported by cold statistics. Information gathered by the U.S. Bureau of Labor states that in 2006, about 5 million Americans were being hired every month.
Bonus Paper The Great Recession of 2007-2009 was very harmful to the economy of the United states. Many people lost their jobs and were forced to work at lower wages, so the demand for consumer goods dropped. Homeowners were also hurt because the value of housing and real estate crashed. This decrease in wealth pushed back the retirement age for many people. The financial situation was especially worrisome for my personal household during the Great Recession.
The fall in consumer consumption has had its toll on the GDP as it too has slowed. Again, the economy has continued its growth, but the vigorous rate that it has been cruising along is falling. The US international trade deficit is growing every year revealing the US's dependencies on imports vs. exports. The need for vast imports is not unusual, but the level of exports continues to fall. The Balance of US International Trade in Goods and Services for Jan.-Dec. of 1997 was -104.7 billion dollars and -164.2 billion this year.
One of the first factors of the recession was the housing market which has taken a hit. Several families have been forced out of their homes when they have became unable to make their mortgage payments. Seven and a half million mortgages were past due or being foreclosed on (Felton 35). At least one million other homes are on the brink of foreclosure. When you are without a home it is much more difficult to escape the vicious cycle of poverty, you are unable to apply for a job since you do not have a permanent address thus only pushing the nation farther into despair.
The bubble forced banks to give out homes loans with unreasonably high risk rates. The response of the banks caused a decline in the amount of houses purchased and “a crisis involving mortgage loans and the financial securities built on them” (McConnell, 2012 p.479). The effect on the economy was catastrophic and caused a “pandemic” of foreclosures that effected tens of thousands home owners across the U.S. (Scaliger, 2013). The debt burden eventually became unsustainable and the U.S. crisis deepened as the long-term effect on bank loans would affect not only the housing market, but also the job market. What at first seemed to be an economic slump turned into a brutal crisis, and all eyes looked to the Government and Federal Reserve to help the economy.