Great Recession Of 2008 Cause And Effect Essay

Skrypnyk Veronika
ESL 6A
Cause-and-Effect Essay

The Great Recession of the United States

The Great Recession of 2000s in the United States was the long and extensive economic crisis since the Great Depression of 1929-32. A recession is an overall period of general economic decline. The bursting of an 8 trillion dollar housing bubble was the beginning of the Great Recession. In 2008 and 2009 the United States job market lost 8.4 million work position , or 6.1% of all payroll employment. It was the worst capitalist economic slump in the nation’s history. There are three major causes of the Great Recession in the United States: credit crunch and fall in bank lending, weak dollar, and sudden rise in price of oil. The primary cause of the Great Recession was the credit crunch and fall in bank lending. Time 2000-2006 was a period of powerful economic growth and minimal inflation. In this regard, banks lost their criteria for giving mortgages. Many homeowners received large mortgages with limited checks on ability to repay. In the middle of 2006 the American housing market bubble burst. Real estate prices began to rapidly decrease, and there started a rise in mortgage
defaults. When the banks began to demand their money back, many people who have received credits, were unable to return them back. Banks began to lose considerable sums of money. They started to be at a loss, so it became impossible to get credit. Many of American banks lost large sums of money and were on the verge of bankruptcy. The second major factor causing the Great Recession was weak dollar.
The depreciating dollar had contributed to cost-push inflation and declining in living standards , where consumer merchandises were more expensive leading to lower spending power of individuals. The United States is well known for importing diverse goods across the planet. But the United States did not have enough capacity to buy imports. This caused the country to lose on their price to rise, leading to the down fall. In his article in the Forbes Brian Domitrovic write,: “ In our own Great Recession , we had Dodd-Frank. This omnibus bill of the summer 2010 carpeted the financial industry with regulations.” The very existence of Dodd-Frank has allowed its advocates to presume that a lack of regulation caused the panic of
2008. The third factor causing the Great Recession was sudden rise in price of oil. In the beginning of the 2000s was a war in Iraq, and a very difficult time in the history of this country. Iraq supplied oil in the world scale. Due to the conflict and military operations in this country, they were no longer able to supply oil, and therefore the world’s oil supply plummeted. This greatly influenced rise in price of oil. This means that many companies could no longer manufactured and produced, so the prices of goods increased. This led to decrease in the purchasing power of the population, and this affected that many companies and firms were collapsed. In conclusion, recession is the part of what a specialists call a Business cycle. It is the up and down the economy. Great Recession render a vast impact to the United States such as fall in demands, shortage of cash, decreasing growth rate, and high unemployment rate. The United States came through the worst economic crisis. Credit crunch, financial instability, fall in exports from global recession, weak dollar, and sudden rise in price of oil were the main causes of the great recession.
Works Cited
Domitrovic, Brian.” The Weak Dollar Caused the Great Recession.”Forbes 13 Mar.2012
Pettinger, Tejvan. “The Great Recession 2008-13.” May16, 2013 www.economicshelp.org/blog/7510/
www.washingtonpost.com/wp-dyn/content/article/2007/11/09