Overview According to the U.S. National Bureau of Economic Research (the official arbiter of U.S.
recessions) the recession began in December 2007.US mortgage-backed sec urities, which had risks that were hard to assess, were marketed around the worl d. A more broad based credit boom fed a global speculative bubble in real estate and equities, which served to reinforce the risky lending practices.The precari ous financial situation was made more difficult by a sharp increase in oil and f ood prices. The emergence of sub-prime loan losses in 2007 began the crisis and exposed other risky loans and over-inflated asset prices. With loan losses mount ing and the fall of Lehman Brothers on September 15, 2008, a major panic broke o ut on the inter-bank loan market. As share and housing prices declined, many lar ge and well established investment and commercial banks in the United States and Europe suffered huge losses and even faced bankruptcy, resulting in massive pub lic financial assistance. A global recession has resulted in a sharp drop in international trade, rising u nemployment and slumping commodity prices. In December 2008, the National Bureau of Economic Research (NBER) declared that the United States had been in recessi on since December 2007.Several economists have predicted that recovery may not a ppear until 2011 and that the recession will be the worst since the Great Depres sion of the 1930s.Paul Krugman, who won the Nobel Memorial Prize in Economics, o nce commented on this as seemingly the beginning of "a second Great Depression." The conditions leading up to the crisis, characterized by an exorbitant rise in asset prices and associated boom in economic demand, are considered a result of the extended period of easily available credit and inadequate regulation and ove rsight. The recession has renewed interest in Keynesian economic ideas on how to combat recessionary conditions. Fiscal and monetary policies have been significantly ea sed to stem the recession and financial risks. Economists advise that the stimul us should be withdrawn as soon as the economies recover enough to "chart a path to sustainable growth". Causes Main article: Causes of the late-2000s recession
The great asset bubble:1.Central banks' gold reserves $0.845 tn. 2.M0 (paper money) - $3.9 tn. 3.traditional (fractional reserve) banking assets $39 tn. 4.shadow banking assets $62 tn. 5.other assets $290 tn. 6.Bail-out money (early 2009) $1.9 tn. Further information: Financial crisis of 2007 2010 Debate over origins The central debate about the origin has been focused on the respective parts pla yed by the public monetary policy (in the US notably) and by the practices of pr ivate financial institutions. In the U.S., mortgage funding was unusually decent ralized, opaque, and competitive, and it is believed that competition between le nders for revenue and market share contributed to declining underwriting standar ds and risky lending.
The latter had become fragile as a result of severa l factors that are unique to this crisis: the transfer of assets from the balanc e sheets of banks to the markets. when the Commission sought to initiate regulation of derivatives. but only postpone it.Bank oversight had been largely carried out by states' attorney generals' offices until 2004 when John D." Inflation-adjusted median household income in the US peaked in 1999 at $53.there is also the argument that Greenspan's actions in the years 2002 2004 were actually motivated b y the need to take the U.High private debt levels also impact growth by making recessions deeper and the following recovery weaker. assuming that middle-class wages remained stagnant while wealth c oncentrated at the top.445 in 2010.The collap se of the real estate market in 2006 was the close point of origin of the crisis . and Jill Drew wrote a leng thy article in The Washington Post titled. Some economists those of the Austrian school and those predicting the recession su ch as Steve Keen claim that the ultimate point of origin of the financial crisis o f 2007 2010 can be traced back to an extremely indebted US economy. allowed huge amounts of "easy" credit-based money to be injected into the fin ancial system and thus create an unsustainable economic boom). Ultimately. and the application of fair value accounting. went up t o 52. one must add the now st andard failure of regulators and supervisors in spotting and correcting the emer ging weaknesses.In the US total debt now is about 350% of GDP and that number is among the highest ever recorded.A crucial facilitating role in the dis aster was played by hedge funds.. Anthony Faiola.In their investigat ion. low-quality mortgages acted as an accelerant to the fire that spread through the entire financial system. dropped to $51.S. the failure of ratings agencies to properly assess the risk of such assets. it was the collapse of a specific kind of derivative. and households "pull equity from their homes and overloa d on debt to maintain living standards. the authors claim that former Federal Reserve Board Chairman Alan Greenspan . To these factors. Robert Reich claims the amount of debt in the US economy can be traced to econom ic inequality. specifically under the leadership of Brooksley E. economy out of the early 2000s recession caused by t he bursting of the dot-com bubble although by doing so he did not help avert the c risis. and SEC Chairman Arthur Levitt vehemently opp osed any regulation of financial instruments known as derivatives. While Greenspan's role as Chairman of the Federal Reserve has been widely discus sed (the main point of controversy remains the lowering of the Federal funds rat e to 1% for more than a year which. Hawke.112. According to o ne study a public debt level of over 90% of GDP reduces economic growth by at le ast 1% per year on average. and has since trended down ward to $49. Comptroller of the Currenc y's decision to bar states from monitoring and regulating banks ended this pract ice based upon the 1863 National Bank Act. Jr. The failure rates of subprime mortgages were the first symptom of a credit boo m turned to bust and of a real estate shock.174 in 2004. the mortgage-backed securi ty. The last time median household income was at this level was in 1996 at $49. Treasury Secretary Robert Rubin. They further claim that Greenspan actively sought to undermine the office of the Commodity Fu tures Trading Commission. Rathe r.On October 15. according to the Austrian School of economic s. But large default rates on subprime mortgages cannot account for the severity of the crisis. the creation of complex and opaque assets.823 in 2007 (at the peak of the housing bubble). 2008. Born . the number of suburban households below the poverty line increased
. that triggered the economic crisis of 2008. Ellen Nakashima. "What Went Wrong". indicating that the recession of the early 2000s and th e 2008 2012 global recession wiped out all middle class income gains for the last 15 years. Between 2 000 and 2010.This income drop has caused a dramatic rise in people living under the poverty level and has hit suburbia particularly hard.252 ( at the peak of the Internet stock bubble).
9% in the ear lier period is a record-breaker already. 2008 the Belgian. income levels have dropped substantially with the median male worker making $32. which was in decline year-on-year since the final quarter of 2006. in decline for five straight quarters. comparable to levels seen during t he Great Depression. the UK and Spain completed their initial plans. the measures were dedicated to households (tax rebates) reform of the taxation system to support specific secto rs such as housing. with most of that drop occurring since 2007. Luxembourg and Dutch authorities partially na tionalized Fortis. 1. adding back those workers increases the unemployment rate to over 20%.6% per quarter vs.
European policy responses Until September 2008. but the pace down 2.2009 is considered to be the worst ec onomic downturn since the Great Depression. and the subsequent economic recovery one of the weakest. According to Shadowstats. Effects Main article: Effects of the late-2000s recession US Overview
International trade.5 trillion of value of global comp anies has been erased since the crisis began. dropping 23. 2000-2010. The European Commission proposed a 200 billion stimulus plan to be implemented at the European level by the countries. and by early 2009 was falling at an annualized pace not seen since the 1950s. At the beginning of 20 09. The pace of collapse in residential investment picked up speed in the first quarter of 20 09.
. 5. On September 29.2% year-on-year. US Domestic demand.A plunge in the volumes of exchanges c an be seen as of the second half of 2008. The weak economic performance since 2000 has seen the perce ntage of working age adults actually employed drop from 64% to 58% (a number las t seen in 1984). The present recession is shaping up to be the worst post-World War II contractio n on record: Real gross domestic product (GDP) began contracting in the third quarter of 2008 .4 Million have been added to federal disability rolls as discouraged workers g ive up looking for work and take advantage of the federal program. compared to a 23 percent increase in poor households in urban ar eas.While the headline unemployme nt never reached the levels of the early 1980s recession. The German government bailed out Hypo Real Estate. while Germany announced a ne w plan. is still three months shy of the 1974 75 record. For the majority. European policy measures were limited to a small number of countries (Spain and Italy).137 in 2010.by 53 percent. matched the 1957 58 post war record in the first quarter of 2009. nearly four percentage points faster than in th e previous quarter. and $32.844 in 1968. 2000=100. A report in 2009 by Bloomberg states that $14.The recession of 2007. when the long term unemployed were dropp ed from the headline number. Capital investment. In both countries. this may be due to a c hange in reporting methodology in 1994.
the free-floating Polish zloty. As for central bankers. They also pledged to fig ht against all forms of protectionism and to maintain trade and foreign investme nts. the relatively recent dismantling of EU trade barriers and the resulting surge in demand for Polish goods since 2004 . through a strengthening of the IMF. While China. a tradition of government fiscal responsibility. the receipt of direct EU funding since 2004. the leaders decided to help emerging and developing countries. Another G-20 summit was held in London on April 2009. They decided to coordinat e their actions and to stimulate demand and employment. Apart from proposals on international financial regulatio n.9 per cent is expected to be upgraded . Along with this. finally the government will write away any eligible lending between the British banks with a limit to £250 billion. they pledged to take measures to support their economy and to coordinate them . but the need to cooperate at the global level has led leaders to activat e the G-20 major economies entity. India and Iran have experienced slowing growth. T he first £200 billion would be made in regard to the banks in liquidity stack.  Global responses
Responses by the UK and US in proportion to their GDPs Most political responses to the economic and financial crisis has been taken. as seen above. and to implement rapidly the stimul us plans. w hile its IMF 2010 GDP growth forecast of 1. Finally. The European Union Presidency confirmed that the EU wa s at the time strongly resisting the US pressure to increase European budget def icits. As of D ecember 2009 the Polish economy had not entered recession nor even contracted. Finance ministers and cent ral banks leaders of the G-20 met in Horsham on March to prepare the summit. A first summit dedicated to the crisis took p lace. The plan comprises three parts. They also committed to maintain the supply of credit by providing more liqu idity and recapitalizing the banking system. they have not enter
. a relatively large internal market. at the Heads of state level in November 2008 (2008 G-20 Washington summit) . The second part will consist of the state government increasing the capital market within the banks. The G-20 countries met in a summit held on November 2008 in Washington to addres s the economic crisis. Countries maintaining growth or technically avoiding recession Poland is the only member of the European Union to have avoided a decline in GDP . they pledged to maintain low-rates policies as long as necessary. and refused any resort to protectionism. Some coordination took place at the European level. £50 billion will be made available if the banks needed it. low labour costs attracti ng continued foreign direct investment.On 8 October 2008 the British Government announced a bank rescue package of arou nd £500 billion ($850 billion at the time). by individual nations. and pledged to restore global growth as soon as possible. economic difficulties at the start of th e decade which prompted austerity measures in advance of the world crisis.Analysts have identified several causes: Extremely low levels of bank lending a nd a relatively very small mortgage market. meaning that in 2009 Poland has created the most GDP growth in the EU. In March 2009. In early December German Finance Minister Peer Steinbrück indicated a lack of beli ef in a "Great Rescue Plan" and reluctance to spend more money addressing the cr isis. lack of over-dependence on a sing le export sector.
S. w hile the the unemployment rate in Spain was reported to be 24. Unemplo yment increased drastically starting in September 2008 following the bankruptcy of Lehman Brothers. U-S unemployment had risen to 8.It was the only developed economy to expand in the first half of 2009. the unemployment rate is 8. The peak in unemployment.7million unemployed.In March 20 09. Even at the peak of the recession. Australia avoided a technical recession after experiencing only one quarter of n egative growth in the fourth quarter of 2008.6million.5 million mark. with close to 2.Po rtugal also faces tough economic times and high unemployment. In late 2007.6% for May 2012.9% in March 2012. statistician John Williams argued that "measurement changes implemented over the years make it impossible to compare the current unemployment rate with that seen during the Great Depression".The Uni ted States entered into recession in December 2007when job losses began. with GDP returning to positive in the first quarter of 2009. accountin g for 8. the official U. As of January 2012. South Korea narrowly avoided technical recession in the first quarter of 2009. when US unemployment peaked at 25% of the labour force.8%. unemployment stood at around 1. High energy prices and a depressed housing market are factors cited for bringing economic growth to a halt.ed recession.5%.Th e International Energy Agency stated in mid September that South Korea could be the only large OECD country to avoid recession for the whole of 2009. unemploym ent rate had increased to 9. came some two years after the recession. the job losses have been demonstrably less than during the Great Depress ion of the 1930s. with Greece's ongoing economic contraction increasing the unemployment rate to 21.
Job losses and unemployment rates Main article: Job losses caused by the late-2000s recession Many jobs have been lost worldwide following the onset of a recession in 2007. Greece and Spain have been two of the hardest hit nations.By December 2010. the unemploym ent rate never reached levels of the early 1980s recession.4% .3%. however. So far.
. with the Prime Min ister proposing that one solution would be for Portuguese to emigrate and find w ork in other countries.marginally higher than the unemployment rate in the United States.However.In March 2009. in December 2011. by early 2009 t hat figure had increased to more than 2 million and a year later it rose past th e 2. Mass unemployment has also affected the United Kingdom since the recession began .