Changes

==Overview==

==Overview==

Negative economic news has spread outward from financial institutions to depress housing, construction, office buildings, automobiles, retail sales, state and local government, and virtually every other sector of the economy. Consumer spending plunged, and banks were very reluctant to loan money. Major banks and corporations have gone bankrupt.  

Negative economic news spread outward from financial institutions to depress housing, construction, office buildings, automobiles, retail sales, state and local government, and virtually every other sector of the economy. Consumer spending plunged, and banks were very reluctant to loan money. Major banks and corporations went bankrupt.  

The recession is worldwide.  Initially governments across the world have borrowed and spent huge sums of money to reverse the crisis, but the results were inconclusive and anaemic while the declines continued.<ref>By 2013, the notion of a Keynesian stimulus had been abandoned by the the European Union, which cut it's budget in real terms, and the United States which invoke a [[sequestration]] of federal mandated spending to reduce the baseline for future years. While the prospect of deflation ordinarily would be real, the Federal Reserve has vastly increased the [[money supply]] both domestically and abroad with lending to foreign [[Central bank]]s. Although the U.S. monetary base aggregates are four times larger than in mid 2007, federal spending is 50% more than in 2008, and  the accumulated [[national debt]] one-third greater, U.S. [[GDP]] output still lags and workforce is the size (134 million workers) as it was in 2003 - despite population having grown by 24 million people.</ref>  The U.S. government provided cash bailouts of several hundred billion dollars and long-term loan guarantees of over $7 trillion dollars (compared to a GDP of $14.6 trillion in 2008).   

The recession is worldwide.  Initially governments across the world borrowed and spent huge sums of money to reverse the crisis, but the results were inconclusive and anaemic while the decline continued.<ref>By 2013, the notion of a Keynesian stimulus had been abandoned by the the European Union, which cut it's budget in real terms, and the United States which invoked a [[sequestration]] of federal mandated spending to reduce the baseline for future years. While the prospect of deflation ordinarily would be real, the Federal Reserve had vastly increased the [[money supply]] both domestically and abroad with lending to foreign [[Central bank]]s. Although the U.S. monetary base aggregates were four times larger than in mid 2007, federal spending was 50% more than in 2008, and  the accumulated [[national debt]] one-third greater, U.S. [[GDP]] output still lagged and the workforce was the size (134 million workers) as it was in 2003 - despite population having grown by 24 million people.</ref>  The U.S. government provided cash bailouts of several hundred billion dollars and long-term loan guarantees of over $7 trillion dollars (compared to a GDP of $14.6 trillion in 2008).   

Unlike crises in the mid 1970s and early 1980s, this one began in the financial sector with devastating effects on many very large financial companies worldwide, especially in September 2008.  The negative effects by October 2008 began spreading to all other sectors of the economy, and forecasts for the next year show little likely of a quick recovery anywhere. For the effects on the broader economy (outside of finance and autos) see [[Recession of 2008]].

Unlike crises in the mid 1970s and early 1980s, the panic began in the financial sector with devastating effects on many very large financial companies worldwide, especially in September 2008.  The negative effects by October 2008 began spreading to all other sectors of the economy, and forecasts for the next several years showed little likelihood of a quick recovery anywhere. For the effects on the broader economy (outside of finance and autos) see [[Recession of 2008]].

The crisis originated in the United States and Western Europe, and has impacted every country in the world. Banks and financial companies have reported losses of over one trillion dollars; investors have suffered [[paper loss|"paper losses"]] of many trillions. U.S. stocks are down 50% from their peak in 2007.<ref> For most people the loss is a "paper" loss because they still own the stock and it might go up, or down. If they bought stock in 2003 for $1000, watched it go to $1500 in 2008, then drop to $1000 again in 2008, their "paper loss" is $500 but their real loss is zero since they are back where they started. People who bought at $800 still have made a $200 paper profit. People who bought at $1200, say, have a paper loss of $200. The paper loss or gain becomes real when they finally sell the stock. See [[Paper loss]] for more details</ref> Paper losses for owners of stock in major financial institution have been over 70%, and owners of some have lost 99% as major [[bank]]s closed down. The [[stock market]] has declined 50-70% in major countries and [[pension]] funds have large paper losses.  Paper losses in real estate have been in the trillions; the average price of American houses fell 20%, with 30% and higher declines in California and Florida.  However, thus far ordinary depositors with cash in the bank have suffered no losses. Owners of stocks in the 5000 largest U.S. corporations have paper losses of $10 trillion dollars in 2008, dropping to $10 trillion in October from $20 trillion in late 2007.  

In late September the crisis focused on liquidity--financial companies owned hundreds of billions of dollars of "toxic" securities, mostly based on U.S. [[mortgage]]s; they could not sell the toxic securities because no one knew how much they were worth, and large scale loans between major institutions stopped flowing as the system lost liquidity and froze up. A $800 billion rescue plan became law in the U.S. October 3, but its impact will not be clear for a while. Meanwhile Europe's economic crisis continues to deteriorate, as trillions of dollars in losses accumulate there and in Russia, China and India and in many smaller countries.  International agencies such as the International Monetary Fund are arranging emergency bailouts for medium-sized countries, like Pakistan and Ukraine.  All around the world people are sending their money to the U.S. and Japan because the banks there are safer than their own banks.  The price of oil, which reached $145 a barrel in the summer, plunged to under $50. That plunge eased the gasoline crisis, helped commuters, and helped the airline industry.

In late September the crisis focused on liquidity--financial companies owned hundreds of billions of dollars of "toxic" securities, mostly based on U.S. [[Fannie Mae]]-backed [[mortgage]]s; they could not sell the toxic securities because no one knew how much they were worth, and large scale loans between major institutions stopped flowing as the system lost liquidity and froze up. A $800 billion rescue plan became law in the U.S. October 3. Meanwhile Europe's sovereign debt crisis continues to deteriorate, as trillions of dollars in losses accumulated there and in many other countries.  International agencies such as the International Monetary Fund are assisting and giving guidance for medium-sized countries, like Pakistan and Ukraine.  All around the world people are sending their money to the U.S. and Japan because the banks there are safer than their own banks.  The price of oil, which reached $145 a barrel in the summer, plunged to under $50. That plunge eased the gasoline crisis, helped commuters, and helped the airline industry.

[[Image:BRIDGE.JPG|thumb|400px|Tom Toles cartoon lampoons Federal bailout efforts as a badly designed [[bridge to nowhere]], Dec. 1, 2008]]

[[Image:BRIDGE.JPG|thumb|400px|Tom Toles cartoon lampoons Federal bailout efforts as a badly designed [[bridge to nowhere]], Dec. 1, 2008]]

Both parties have expressed anger at the crisis, and have promised extensive new regulations of the financial industry. However the Republicans have blocked additional bailout aid to General Motors, which is on the verge of bankruptcy.<ref> Treasury Secretary Paulson told Congress on Nov. 18 that the Bush administration remains "firmly opposed" to using any of the $700 billion financial bailout fund to help rescue Detroit's Big Three, "no matter how badly they need the help." [http://www.foxnews.com/politics/2008/11/18/paulson-rejects-bailout-money-automakers-senate-considers-legislation/ Fox news report] </ref> Democratic Congressional leaders and President-elect [[Barack Obama]] have pushed for a [[bailout]] of the auto industry and are expected to move it forward in January, 2009.

Both parties have expressed anger at the crisis, and have promised extensive new regulations of the financial industry. However the Republicans have blocked additional bailout aid to General Motors, which is on the verge of bankruptcy.<ref> Treasury Secretary Paulson told Congress on Nov. 18 that the Bush administration remains "firmly opposed" to using any of the $700 billion financial bailout fund to help rescue Detroit's Big Three, "no matter how badly they need the help." [http://www.foxnews.com/politics/2008/11/18/paulson-rejects-bailout-money-automakers-senate-considers-legislation/ Fox news report] </ref> Democratic Congressional leaders and President-elect [[Barack Obama]] have pushed for a [[bailout]] of the auto industry and are expected to move it forward in January, 2009.