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The Great Recession has resulted in the scarcity of valuable assets in the market economy and the collapse of the financial sector in the world economy. Under the academic definition, the recession ended in the United States in June or July 2. The seasonally adjusted PPP. National Bureau of Economic Research (the official arbiter of U. S. Many of these securities were backed by subprime mortgages, which collapsed in value when the U. S. With loan losses mounting and the fall of Lehman Brothers on 1. September 2. 00. 8, a major panic broke out on the inter- bank loan market. There was the equivalent of a bank run on the shadow banking system, resulting in many large and well established investment and commercial banks in the United States and Europe suffering huge losses and even facing bankruptcy, resulting in massive public financial assistance (government bailouts). The recession has renewed interest in Keynesian economic ideas on how to combat recessionary conditions. Economists advise that the stimulus should be withdrawn as soon as the economies recover enough to . Central banks' gold reserves: $0. M0 (paper money): $3. Traditional (fractional reserve) banking assets: $3. Shadow banking assets: $6. Other assets: $2. Bail- out money (early 2. Panel reports. Financial Crisis Inquiry Commission, composed of six Democratic and four Republican appointees, reported its findings in January 2. One of them, signed by three Republican appointees, concluded that there were multiple causes. In his separate dissent to the majority and minority opinions of the FCIC, Commissioner Peter J. Wallison of the American Enterprise Institute (AEI) primarily blamed U. S. At the same time, weak underwriting standards, unsound risk management practices, increasingly complex and opaque financial products, and consequent excessive leverage combined to create vulnerabilities in the system. Policy- makers, regulators and supervisors, in some advanced countries, did not adequately appreciate and address the risks building up in financial markets, keep pace with financial innovation, or take into account the systemic ramifications of domestic regulatory actions. Four such narratives include: There was the equivalent of a bank run on the shadow banking system, which includes investment banks and other non- depository financial entities. This system had grown to rival the depository system in scale yet was not subject to the same regulatory safeguards. Its failure disrupted the flow of credit to consumers and corporations. When it burst, private residential investment (i. GDP and consumption enabled by bubble- generated housing wealth also slowed. This created a gap in annual demand (GDP) of nearly $1 trillion. Consumers began paying off debt, which reduces their consumption, slowing down the economy for an extended period while debt levels are reduced. Further, this greater share of income flowing to the top increased the political power of business interests, who used that power to deregulate or limit regulation of the shadow banking system. That deficit was financed by inflows of foreign savings, in particular from East Asia and the Middle East. Much of that money went into dodgy mortgages to buy overvalued houses, and the financial crisis was the result. This pool of fixed income savings increased from around $3. NPR explained this money came from various sources, . China, India, Abu Dhabi, Saudi Arabia made a lot of money and banked it. In the U. S., mortgage funding was unusually decentralised, opaque, and competitive, and it is believed that competition between lenders for revenue and market share contributed to declining underwriting standards and risky lending. USA household debt as a percentage of annual disposable personal income was 1. High private debt levels also impact growth by making recessions deeper and the following recovery weaker. In advanced economies, during the five years preceding 2. In Denmark, Iceland, Ireland, the Netherlands, and Norway, debt peaked at more than 2. A surge in household debt to historic highs also occurred in emerging economies such as Estonia, Hungary, Latvia, and Lithuania. The concurrent boom in both house prices and the stock market meant that household debt relative to assets held broadly stable, which masked households. When house prices declined, ushering in the global financial crisis, many households saw their wealth shrink relative to their debt, and, with less income and more unemployment, found it harder to meet mortgage payments. By the end of 2. 01. Ireland, 2. 9% in Iceland, 2. Spain and the United States, and 2. Denmark. Household defaults, underwater mortgages (where the loan balance exceeds the house value), foreclosures, and fire sales are now endemic to a number of economies. Household deleveraging by paying off debts or defaulting on them has begun in some countries. It has been most pronounced in the United States, where about two- thirds of the debt reduction reflects defaults. A 2. 00. 9 paper identifies twelve economists and commentators who, between 2. United States. Federal Reserve Chairman Alan Greenspan said in mid- 2. The legislation gave HUD the power to set future requirements, and eventually (under the Bush Administration) a 5. In 2. 00. 1, the independent research company, Graham Fisher & Company, stated: . They contend that lenders relaxed lending standards in an effort to meet CRA commitments, and they note that publicly announced CRA loan commitments were massive, totaling $4. This is analogous to allowing many persons to buy insurance on the same house. Speculators that bought CDS protection were betting that significant mortgage security defaults would occur, while the sellers (such as AIG) bet they would not. An unlimited amount could be wagered on the same housing- related securities, provided buyers and sellers of the CDS could be found. Several sources have noted the failure of the US government to supervise or even require transparency of the financial instruments known as derivatives. Born, head of the Commodity Futures Trading Commission, put forth a policy paper asking for feedback from regulators, lobbyists, legislators on the question of whether derivatives should be reported, sold through a central facility, or whether capital requirements should be required of their buyers. Greenspan, Rubin, and Levitt pressured her to withdraw the paper and Greenspan persuaded Congress to pass a resolution preventing CFTC from regulating derivatives for another six months . Influential figures should have proclaimed a simple rule: anything that does what a bank does, anything that has to be rescued in crises the way banks are, should be regulated like a bank. The investment banks were not subject to the more stringent regulations applied to depository banks. These failures exacerbated the instability in the global financial system. The remaining two investment banks, Morgan Stanley and Goldman Sachs, potentially facing failure, opted to become commercial banks, thereby subjecting themselves to more stringent regulation but receiving access to credit via the Federal Reserve. AIG was contractually required to post additional collateral with many creditors and counter- parties, touching off controversy when over $1. U. S. While this money was legally owed to the banks by AIG (under agreements made via credit default swaps purchased from AIG by the institutions), a number of Congressmen and media members expressed outrage that taxpayer money was used to bail out banks. In the earlier episodes, depositors ran to their banks and demanded cash in exchange for their checking accounts. Unable to meet those demands, the banking system became insolvent. The current panic involved financial firms . Yet, over the past 3. Key components of the market . We had a 2. 1st- century financial system with 1. For example, Ravi Batra argues that growing inequality of financial capitalism produces speculative bubbles that burst and result in depression and major political changes. They argue that such a reshaping should include new advances within feminist economics and ecological economics that take as their starting point the socially responsible, sensible and accountable subject in creating an economy and economic theories that fully acknowledge care for each other as well as the planet. By definition, the three balances must net to zero. Changes in Employment for Selected Time Periods. U. S. A 2. 01. 1 poll found that more than half of all Americans thought that the U. S. GDP remained only a little over 4. CBO projected that GDP would not return to its potential level until 2. By the final quarter of 2. US GDP had grown by 1. Canada, the United States' largest trading partner by then, had a GDP of $1. Both countries now have the fastest growing economies within the G8 and G2. Billion in 2. 01. Billion in 2. 01. The unemployment rate rose from 5% in 2. March 2. 01. 3. Non- residential investment (mainly business purchases of capital equipment) peaked at $1,7. Stock prices began a steady climb thereafter and returned to record levels by April 2. It began to recover thereafter and was $6. Q3 2. 01. 2. The weak economic performance since 2. The middle class dropped from 6. The share for the middle class dropped to 4. Since the number of poor increased during this period the smaller piece of the pie (down to 9% from 1. The younger generation, which would be just starting their wealth accumulation, has been the most hard hit. Those under 3. 5 are 6. In 2. 00. 9, the wealthiest 2. The top 1% controlled 3. The last time median household income was at this level was in 1. Between 2. 00. 0 and 2. Source Data: Eurostat. Relationship between fiscal tightening (austerity) in Eurozone countries with their GDP growth rate, 2. Several countries received bailout packages from the . For example, according to the CIA World Factbook Greece improved its budget deficit from 1. GDP in 2. 01. 0 to 9. Iceland, Italy, Ireland, Portugal, France, and Spain also improved their budget deficits from 2. GDP. Greece's public- debt- to- GDP ratio increased from 1. This indicates that despite improving budget deficits, GDP growth was not sufficient to support a decline (improvement) in the debt- to- GDP ratio for these countries during this period. Eurostat reported that the debt to GDP ratio for the 1. Euro area countries together was 7. France had no significant changes, while in Germany and Iceland the unemployment rate declined. Unemployment varied significantly by country. They bring exactly what one would expect: small contractions bring recessions and big contractions bring depressions. No wonder, then, that the whole austerity enterprise is spiraling into disaster. As of December 2. Polish economy had not entered recession nor even contracted, while its IMF 2. GDP growth forecast of 1. Experts see several reasons: Africa was not affected because it is not fully integrated in the world market. Latin America and Asia seemed better prepared, since they have experienced crises before. In Latin America, for example, banking laws and regulations are very stringent. Bruno Wenn of the German DEG suggests that Western countries could learn from these countries when it comes to regulations of financial markets. Only 1. 1 out of the 7. GDP data (Poland, Slovakia, Moldova, India, China, South Korea, Indonesia, Australia, Uruguay, Colombia and Bolivia) escaped a recession in this time period. The few recessions appearing early in 2. Great Recession, which is illustrated by the fact that only two countries (Iceland and Jamaica) were in recession in Q4- 2. One year before the maximum, in Q1- 2. Iceland, Sweden, Finland, Ireland, Portugal and New Zealand). The number of countries in recession was 2. Q2. At the steepest part of the Great Recession in Q1. The number of countries in recession was 3. Q2. One year after the maximum, in Q1. As of October 2. 01. Cyprus, Italy, Croatia, Belize and El Salvador), were still in ongoing recessions. The following 2. 1 countries were also excluded from the table, due to only publishing unadjusted quarterly real GDP figures with no seasonal adjustment: Armenia, Azerbaijan, Belarus, Brunei, Dominican Republic, Egypt, Georgia, Guatemala, Iran, Jordan, Macao, Montenegro, Morocco, Nicaragua, Nigeria, Palestine, Qatar, Rwanda, Sri Lanka, Trinidad and Tobago, Vietnam.^ ab. Only seasonally adjusted qoq- data can be used to accurately determine recession periods. When quarterly change is calculated by comparing quarters with the same quarter of last year, this results only in an aggregated - often delayed- indication, because of being a product of all quarterly changes taking place since the same quarter last year. Currently there is no seasonal adjusted qoq- data available for Greece and Macedonia, which is why the table display the recession intervals for these two countries only based upon the alternative indicative data format.^Bolivia had as of January 2. GDP data until Q1- 2. UK, France, Germany and Italy) along with the EU Commission as the 2. EU member states in the forum. By mid- 2. 01. 2 Iceland is regarded as one of Europe's recovery success stories largely as a result of a currency devaluation that has effectively reduced wages by 5. In the year to the third quarter of 2. China grew by 9%. Until recently Chinese officials considered 8% GDP growth to be required simply to create enough jobs for rural people moving to urban centres. This addition reflects the assessment of U. S. If you're in a much longer- run downturn, then all bets are off. In Brazil, disaffected youth rallied against a minor bus- fare hike. In all these cases, the ostensible immediate cause of the protest was amplified by the underlying social suffering induced by the great recession. In January 2. 00. Iceland were forced to call elections two years early after the people of Iceland staged mass protests and clashed with the police because of the government's handling of the economy. The rally gathered some 1. In the evening the rally turned into a Riot. The crowd moved to the building of the parliament and attempted to force their way into it, but were repelled by the state's police. In late February many Greeks took part in a massive general strike because of the economic situation and they shut down schools, airports, and many other services in Greece. Beyond these initial protests, the protest movement has grown and continued in 2. In late 2. 01. 1, the Occupy Wall Street protest took place in the United States, spawning several offshoots that came to be known as the Occupy movement. In 2. 01. 2 the economic difficulties in Spain increased support for secession movements. In Catalonia, support for the secession movement exceeded. On September 1. 1, a pro- independence march drew a crowd that police estimated at 1. As the crisis developed into genuine recession in many major economies, economic stimulus meant to revive economic growth became the most common policy tool. After having implemented rescue plans for the banking system, major developed and emerging countries announced plans to relieve their economies. In particular, economic stimulus plans were announced in China, the United States, and the European Union. To stop the potential run on money market mutual funds, the Treasury also announced on September 1. Federal Deposit Insurance Corporation (FDIC) program. The exceptions would expire on January 3. Federal Reserve Board. Indonesia reduced its overnight repo rate, at which commercial banks can borrow overnight funds from the central bank, by two percentage points to 1. The Reserve Bank of Australia injected nearly $1. The Reserve Bank of India added almost $1. A statement on the government's website said the State Council had approved a plan to invest 4 trillion yuan ($5. The stimulus package will be invested in key areas such as housing, rural infrastructure, transportation, health and education, environment, industry, disaster rebuilding, income- building, tax cuts, and finance. China's export driven economy is starting to feel the impact of the economic slowdown in the United States and Europe, and the government has already cut key interest rates three times in less than two months in a bid to spur economic expansion. On November 2. 8, 2. 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