The Great Recession Analysis

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During the period between December 2007 and June 2009, the world markets faced the worst, largest and longest economic downturn since the Great Depression 1929. The Great Recession is a term that represents this economic crisis. Timing of the recession varied from country to another. The influences of the Great Recession were remarkably severe in several aspects such as, the unemployment rate and real gross domestic product. It also can be observed today from the reformed world of monetary and investment banking how outsized they were. It resulted in the collapse of the financial sector in the world economy and the scarcity of valuable assets in the market. There are many causes of this economic slump, such as, housing market went from boom…show more content…
In the US, for example, as measured by the difference between the economic forecast made in September by Congressional Budget Office (CBO) and the real economic performance in the period from September 2008 through the end of 2009, financial crisis cost the U.S. $648 billion due to slow economic growth. That is almost $5,800 in lost income for each U.S. household. According to the Federal Reserve, the United States lost about $3.4 trillion in real estate wealth from July 2008 to March 2009. This equates to $30,300 per U.S. household. Furthermore, based on the September 2008 CBO forecast, 500,000 further foreclosures began during the critical phase of the economic crisis than were expected. Moreover, during the period from July 2008 to March 2009, the U.S. lost $7.4 trillion in stock wealth. Jobs, on the other hand, were affected by the slow economic growth. 5.5 million more American jobs were lost during the economic slump than what was expected by the September 2008 CBO forecast. In 2007, the unemployment rate was 5 per cent. However, it dramatically rose in June 2009 reaching 9.5 percent and 10 per cent in October 2009. Furthermore, gross domestic product (GDP) and houses prices were also affected by the Great Recession. In the year 2009, the largest decline in the postwar era happened, when the GDP fell 4.3 percent from its peak in 2007 to its lowest in 2009. House prices also fell 30…show more content…
It occurred despite the efforts and policies to prevent banking systems from collapsing, affecting the economic, political and social life of many countries. After the subsequent global financial crisis, the world's path of financial recovery has been fragile and weak. However, if governments took strong decisions and formed strong policies it would be beneficial in the long run. According to Amato (2009) "a country needs to form policies keeping in mind not only the benefit of its domestic market but also of the whole world." Thus, having strong policies, good supervision and regulations helps in predicting financial fluctuations in advance then countries could be protected from adverse consequences of financial instability.
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