What are some causes of recession?

Answer 1

The recession originated in America where mortgage companies got into massive debt by giving out many subprime mortgages. They then bundled this debt on to other countries such as the UK by borrowing from abroad to finance this risky lending.
As UK banks began to struggle, the government allowed them to lend to each other to promote liquidity. Unfortunately, this resulted in more debt and tension between the banks. The negative publicity that Northern Rock brought caused panic to set in as consumers worried the banks would not be able to pay up. Consumer confidence was knocked greatly. Along with the overvalued housing market finally failing, consumption began to fall.
Once Northern Rock was bailed out, some banks thought they were too big to collapse and continued lending for subprime mortgages, which obviously worsened the situation.

Answer 2

Most important point i want to mention is that American economy got struck in recession is because the low and poor economic fundamental of USA. A fall in effective demand will lead to a fall in demand, thus contributing to an economic downturn. For instance, any consumer feeling less secure about his future (jobs or otherwise) might want to delay purchasing a car. When this happens across the economy.

Other things being equal, above average rates of Total Factor Productivity growth (because of technological innovation) generate higher rates of growth in real (inflation adjusted) wages because workers are compensated for producing more goods and services.

Answer 3

It was not any one president's actions that lead to this recession and the economic collapse of 2008. It all started back in the 1970's when the government decided to make home ownership possible for those that would not normally qualify for home loans. The government pushed banks to make risky loans and pushed them to have more and more. This created a housing bubble. Banks were promised that the loans would be covered by the government and the government watched as banks ran wild with these sub-prime loans, selling them world wide. It is a huge, complicated issue but in the end, this has been coming for 30 years and no one in the government was able to stop it.

I would recommend watching the documentary "Inside Job". While it does not cover everything, it does a fairly good job of explaining this in a way we all can understand and is a fairly good jumping off point for those that want to know how the meltdown of 2008 came about.

Answer 4

Long story short, the unrealized (that means paper rather than cash) value of stocks, equity in real estate and high debt created a situation where there was no value to back up the debt based on it. People and companies could not pay the mortgages and amounts due on huge loans and the situation went downhill from there.

Behind the Scenes, laws and regulations had changed (or were being ignored--see Bernard Madoff and the SEC, as an example) to allow transactions and bookkeeping that disregarded best practices developed in the years since the Depression of the 1930's. Greed and the opportunity to make big money by our government, corporations and others--a lack of integrity--were contributing factors.

The recession is a situation where everyone is cash poor and cannot pay the bills they ran up based on the perceived wealth they had in real estate and in the stock market. Savings have been at an all-time low, so there is not a fallback position for most people. Baby boomers, who are nearing retirement, are at particular risk due to the cost of medical insurance and the loss of much of the value of their savings.

Answer 5

Some reasons for the recent US crisis are

1. The US Real estate market crash - People thought that the real estate prices in US would never come down. but when it did, it brought the whole economy with it

2. The subprime mortgage loans - Loans were given to people with bad credit history.

3. Subprime Mortgage Backed securities - The derivative products produced by investment banks that cast the spell of doom on them. Example lehmann..

4. Credit Default Swaps - Insurance obligations that were created to save investment banks from loan defaults. This caused the insurance companies get into trouble. example AIG

Answer 6

The "Great Recession" began in 2007 with the bursting of the housing bubble. As people lost their wealth, they cut back drastically on spending, which sent the economy into a tailspin.

Answer 7

the war in Iraq.