U.S. Economy

Good Essays
The United States economy is currently not looking very good. Over the past couple of months the economy has taken a turn for the worst and we could be headed into a recession in the coming months or years. The biggest problems are in the real estate and mortgage markets. In 1999, housing prices rose at huge rates and lenders began offering riskier mortgages, which caused homeowners to keep piling up huge debts. People were taking out loans and balloon mortgage payments that they really could not afford. The problem began in late 2007, when housing prices began to fall and the system fell apart causing huge numbers of defaults on home loans and foreclosures. Currently, 5.6% of mortgages are delinquent, the highest rate in 21 years, and 2.5% of mortgages are in foreclosure, the highest rate ever (Fox 2). This has caused banks to lose huge amounts of money and as a result credit is becoming more difficult to get for consumers and businesses. With credit harder to get, consumers have cut back on their spending, which is very bad for the economy since around 72% of economic activity comes from consumers (Gross 2). Retail sales dropped .4% in December, which is disturbing because usually December is the biggest month for retailers. Other factors that show the economy is slipping are that inflation was at 4.1% in December and has steadily been rising (Fox 3). In 2007, food prices rose almost 5% and gas prices rose almost 30% from the year before. Unemployment rates also went up above 5% this month, which is the highest they have been in over 2 years (Fox 3-4). The GDP in the 4th quarter of 2007 also fell significantly from the quarter before. All of these signs and more indicate that the economy in the U.S. right now is not good ...

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... or delay it. If consumers do not have confidence in the economy they may decide to save rather than spend. Only time will tell what is going to happen in the economy but it currently is not looking very good. A recession is part of the business cycle and in the end we may have to go through one before the economy takes off again.

Works Cited

Fox, Justin. "Can the World Stop The Slide?" Time 4 Feb. 2008: 26-30.

Gross, Daniel. "The U.S. Economy Faces the Guillotine." Newsweek 4 Feb. 2008: 39-42.

Wolf, Richard. “Bush, Congress want to move fast to aid economy.” USA Today 23 Jan. 2008: 4A.

Hagenbaugh, Barbara; Kirchhoff, Sue; Waggoner, John; Block, Sandra. “Fed’s move reflects alarm.” USA Today 23 Jan. 2008: 1A, 4A.

Aversa, Jeannine. “Fed Cuts Rates Boldly; Wall Street Wary.” Yahoo! Finance 30 Jan. 2008. .
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