The Great Recession of 2008

Topics: Great Depression, Dow Jones Industrial Average, Unemployment Pages: 2 (885 words) Published: May 23, 2011
The Great recession of 2008
(Article Review)

An economy which grows over a period of time tends to slow down the growth as a part of the normal economic cycle. An economy typically expands for 6-10 years and tends to go into a recession for about six months to 2 years. A recession normally takes place when consumers lose confidence in the growth of the economy and spend less. This leads to a decreased demand for goods and services, which in turn leads to a decrease in production, lay-offs and a sharp rise in unemployment. Investors spend less as they fear stocks values will fall and thus stock markets fall on negative sentiment. The economy and the stock market are closely related. The stock markets reflect the buoyancy of the economy. In the US, a recession is yet to be declared by the Bureau of Economic Analysis, but investors are a worried lot. The Indian stock markets also crashed due to a slowdown in the US economy. The Sensex crashed by nearly 13 per cent in just two trading sessions in January. The markets bounced back after the US Fed cut interest rates. However, stock prices are now at a low ebb in India with little cheer coming to investors. The defaults on sub-prime mortgages (homeloan defaults) have led to a major crisis in the US. Sub-prime is a high risk debt offered to people with poor credit worthiness or unstable incomes. Major banks have landed in trouble after people could not pay back loans (See: Subprime pain: Who lost how much) The housing market soared on the back of easy availability of loans. The realty sector boomed but could not sustain the momentum for long, and it collapsed under the gargantuan weight of crippling loan defaults. Foreclosures spread like wildfire putting the US economy on shaky ground. This, coupled with rising oil prices at $100 a barrel, slowed down the growth of the economy. Tax cuts are the first step that a government fighting recessionary trends or a full-fledged recession proposes to do. In the current case,...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • The Great Recession in the year 2008 Essay
  • Great Recession 2007-2008 Essay
  • The Great Depression of 1929 vs. the Great Recession of 2008 Essay
  • Recession of 2008 Essay
  • Essay about Great Recession
  • Great Recession Essay
  • Essay on Macroeconomics
  • The Great Recession Essay

Become a StudyMode Member

Sign Up - It's Free