Great Recession
The Great Recession (also called the Second Great Depression[1] or Long Recession[2]) was a global economic decline in the late 2000s decade. The effects of the economic problem are still obvious. A few countries, including Italy and Greece, are still in recession.
The Great Recession affected world economies to different degrees. It caused more problems for some countries than others. Overall, this was the worst global recession since World War II.[3] Southern Europe was badly affected. Some countries, including China, India, South Korea, Poland and Australia, did not have a recession during this time.
Economic side-effects include household debt, low wages, high levels of unemployment and very limited chances of global growth as of 2014 in many countries.
The causes of the Great Recession include a bunch of weak-points that developed in the finance system. Another cause is a series of events that began with the bursting of the United States housing bubble in 2005–2012. When housing prices fell and homeowners began to abandon their mortgages, the value of mortgage-backed securities held by investment banks went down in 2007–2008. This caused many banks to collapse or be bailed out in September 2008. This 2007–2008 phase was called the subprime mortgage crisis. The combination of banks unable to provide funds to businesses, and homeowners paying down debt rather than borrowing and spending, resulted in the Great Recession. It began in the U.S. officially in December 2007 and lasted until June 2009, lasting over 19 months.[4]
The recession was not felt the same around the world. In most of the world's big economies, particularly in North America, South America and Europe, they fell into a really bad recession. Many more recently developed economies suffered much less impact, particularly China, India and Indonesia. These economies grew a lot during this period. Similarly, Oceania didn't suffer much impact, due to it being nearby to Asian markets.
Great Recession Media
A bank run at a branch of the Northern Rock bank in Brighton, England, on September 14, 2007, amid speculation of problems, prior to its 2008 nationalisation
The great asset bubble:*1. Central banks' gold reserves: $0.845 trillion*2. M0 (paper money): $3.9 trillion*3. Traditional (fractional reserve) banking assets: $39 trillion*4. Shadow banking assets: $62 trillion*5. Other assets: $290 trillion*6. Bail-out money (early 2009): $1.9 trillion
U.S. residential and non-residential investment fell relative to GDP during the crisis.
U.S. households and financial businesses significantly increased borrowing (leverage) in the years leading up to the crisis.
US household debt relative to disposable income and GDP
U.S. Changes in Household Debt as a percentage of GDP for 1989–2016. Homeowners paying down debt for 2009–2012 was a headwind to the recovery. Economist Carmen Reinhart explained that this behavior tends to slow recoveries from financial crises relative to typical recessions.
Housing price appreciation in selected countries, 2002–2008
Securitization markets were impaired during the crisis.
Several major U.S. economic variables had recovered from the 2007–2009 Subprime mortgage crisis and Great Recession by the 2013–2014 time period.
U.S. Real GDP – Contributions to Percent Change by Component 2007–2009
References
- ↑ "Second Great Depression". The Foreign Affairs. Retrieved July 23, 2014.
- ↑ "Long Recession in Hiring". Think Progress. Retrieved July 23, 2014.
- ↑ "What's a Global Recession". Wall Street Journal. Retrieved July 23, 2014.
- ↑ "Business Cycle Dating". NBER. Retrieved 2023-01-17.
