Essay about Economic Crisis

Submitted By Codysalas
Words: 3586
Pages: 15

Economic Crisis
Cody Salas
Weber State University

Author Note This Paper was prepared for English 2010, 12:30, taught by Professor Deeter

The Great Recession has hit most families pretty hard, unemployment is high, wages are low, and most people are struggling to stay afloat. This paper examines how America has gotten into this mess, how America is recovering, and proposes a plan to get out of this depression-like economy. The paper looks at a key component to the cause of the Great Recession, which is the extremely unequal distribution of wealth which has developed over the past decades. This paper points out that the very wealthy business owners have been benefiting quite in recent decades and has had a huge effect on the economy. Meanwhile, the typical American family is suffering from lack of decent wages and lack of jobs. America has the knowledge to get out of this recession. Let’s end this suffering.

Economic Crisis
In 1929, one of the worst events in American economic history took place. The Stock Market crashed and America’s economy began to quickly spiral downwards into the dark depths of what we now call, The Great Depression. America began to slowly climb out of the depths and by learning from their mistakes, America quickly began to prosper. But, in the few decades leading up to the 21st century, America forgot about what had caused the economic collapse in 1929 and began to head down the wrong economic path. Then in 2007, the economy collapsed again. America blindly fell into the same economic hole, which has been named, The Great Recession. Most people want to know exactly what caused this and there are many different theories of what caused the Great Recession. Personally, I have heard dozens of different explanations about how the Great Recession started, but mostly I have heard people say that banks were lending too much money to people who obviously did not have the income to pay it all back which started putting people into debt and caused the economy to tank. Others have said that the Great Recession was caused by people spending too much money and saving too little, I have even heard one of my relatives—after watching Obama’s America 2016—say that the Great Recession was caused because Obama wants to make America a socialist nation. From what I’ve learned, I believe that the Great Recession was caused by a mixture of the housing market bubble burst and the extreme unequal distribution of wealth. The housing market burst because people would buy houses by getting loans from banks, and banks would basically offer loans to anyone with a beating heart—they would offer loans to a zombie if they could—even if the banks clearly knew that the person could not afford to take out the loan. Banks would do this because the government backs up those loans so if someone couldn’t pay off their loan, the banks would simply collect the insurance money from those loans. It was basically a no risk decision. This caused a lot of people to be in debt and foreclose their homes which eventually led to the stock market freezing up. One economist named Christina Romer said:
House price movements have obviously played a key role in this recession. The rapid rise of house prices led to an incredible boom in homebuilding, and a large increase in household debt. When house prices began to fall in 2007, this put pressure on both homeowners and lenders who were holding lots of mortgage debt. Defaults rose and homebuilding ground to a halt. Eventually, all those defaults led to a loss of confidence in banks—resulting in the first full-fledged financial crisis we have had in the United States in more than two generations Now, most Americans are under water on their houses—their houses are worth less than the mortgages they owe.
The unequal distribution of wealth played a big role in the recession as well. If wealth had been…