The problems arrived over a period of time from 1995 to 2008. The first and main problems that lead to the economic collapse was sub prime mortgages. Sub prime mortgage is a certain kind of loan granted to people with poor credit histories, who which wouldn’t usually be qualified for conventional mortgages (Investopedia). These sup prime mortgages would backfire on banks across the nation resulting in huge financial loses. According to USA Today, “Housing crisis deepens.
However, as soon as the war ended the deficit would be eliminated. When a government spends more than the revenue collected from taxation, tariff, and other fee revenues, the country must borrow money to cover the deficit it faces which when accumulated over the years becomes the national debt. In addition, there are two types of national debt, internal and external debt. Today the debate over the national debt crisis continues and many U.S. citizens are concerned about their financial future. Although, both the Democratic and Republican parties have their own opinions on how to fix this issue, a decision must be made to solve this issue before major repercussions.
Even though there are other areas of concern such as military, education, and social security that the government needs to allocate spend to, reducing the national debt is what our government officials should be their primary expenditure considering how large our debt has gotten to. If the Government does not find a way to reduce its expenditur... ... middle of paper ... ...security. If the government primarily allocated spend to these areas or primarily on the people, then our economy would suffer. In other words, if the U.S. government ignored its debt and only concentrated on its people, the debt would continue to rise and would take longer to pay off. The government needs to start allocating more money to debt and get it paid off so that officials could then make its main focus the citizens.
Classic Economic Model versus Keynesian Theory: Recessionary Impacts The Great Depression in 1929, sparked by a crash in the stock market, was a time which the U.S. economy suffered a tremendous loss in productivity resulting in negative GDP growth. Consumer spending and investment slowed for the next few years due to massive unemployment. “By 1933, when the Great Depression reached its nadir, some 13 to 15 million Americans were unemployed and nearly half of the country’s banks had failed” (“The Great Depression”). In tough economic times British economist John Maynard Keynes believed that government should step in the short run to boost the overall demand by instituting some form of economic spending stimuli. Classical economic
This plan would eliminate the risk of losing payroll tax money because only budget surplus revenue would be invested. Many who oppose The President's plan have lived through the Great Depression, one of the bleakest times in American history. While the Great Depression was triggered ... ... middle of paper ... ... belongs to us, the people. Therefore the government, which holds the key to Social Security and in essence, our future, needs to adjust the system to the needs of it's beneficiaries. Don't cut benefits, as many Americans rely on Social Security for a large portion of their income.
Theoretically, the government has to choices to solve this problem. One way is to decrease its spending, and second way is to increase collecting of tax. But in the real world of economy this or that way will not work. Why the budget deficit of the USA increases during all history of the country? In my opinion, on these questions there is the answer: military expenses, national defense, and war.
Some argue that personal retirement accounts would be a mistake and that the government instead should set up its own investment fund to help finance future benefit payments. The good news is that this indicates a growing awareness that ¡°pre-funding¡± (i.e., accumulating assets) is a necessary component of Social Security reform. The bad news, however, is that government-controlled investment is the wrong answer to the wrong question. It assumes that policymakers should focus solely on balancing the program¡¯s revenues and expenditures. This ignores the other Social Security crisis¡ªthe fact that the tax burden on today¡¯s workers is extraordinarily high compared to the benefits received (often referred to as the rate-of-return crisis).
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.
Penalties were forced upon lending companies who refused to succumb to these destructive ideals, and we as a country entered into another Golden Age. Fast forward to 2009. The economy of the United States has failed dismally. Millions have lost their jobs, and many more have felt the pain as they watch their retirement funds plummet, and the cost of living skyrocket. In the first quarter of 2009, our GDP had dropped over 6%.
Would our small, financially challenged country really be able to stand on its own feet against the bigger countries in the global market? For over 300 years we have been part of Great Britain’s success but now in a time of economic meltdown, people have a growing want for independence. To start, let’s take a look at why our country can’t afford (and will never be able to afford) independence. The credit crunch occurred when our banks were forced to cancel debts after them carelessly giving money to people who could not repay their loans. This forced the government to use public money, to keep the banks afloat and resulted in decreasing our budget by billions of pounds (also causing inflation levels to rise).