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→Origins
[[File:Empl2009.jpg|thumb|400px]]
[[File:Empl2009.jpg|thumb|400px]]
==Origins==
==Origins==
The recession began in January 2008 in the financial sector as major banks in the U.S. and Europe got into serious trouble by investing in bad mortgages. Trouble spread to the [[automobile]] industry, where General Motors and Chrysler went bankrupt in spring 2009, because people were not buying any new cars. They remained solvent by an emergency loan proposed by President [[George W. Bush]] over the objections of Congressional [[Republican Party|Republicans]]. Later a [[bailout]] involving a taxpayer buy out and bankruptcy reorganization was authorized by President [[Barack Obama]] and Congressional [[Democrat]]s.
The recession began in January 2008 in the financial sector as major banks in the U.S. and Europe got into serious trouble by investing in bad mortgages. The crisis spread globally due to the fact that many banks and other business worldwide had invested in these securitized debts. Trouble spread to the [[automobile]] industry, where General Motors and Chrysler went bankrupt in spring 2009, due to a decrease in US consumer demand. They remained solvent by an emergency loan proposed by President [[George W. Bush]] over the objections of Congressional [[Republican Party|Republicans]]. Later a [[bailout]] involving a taxpayer buy out and bankruptcy reorganization was authorized by President [[Barack Obama]] and Congressional [[Democrat]]s.
In the U.S. GDP fell in the fourth quarter of 2008 (October-November-December), by 6.2% annual rate, with declines heaviest in business investment, exports, finance, autos, housing, construction, and retail sales.<ref>Three of the four engines of economic growth -- consumer spending, business investment and exports -- declined sharply. Consumer spending fell at an annualized rate of 4.3%; business investment in equipment and software sank at an astonishing annual rate of 29%; exports of goods and services plunged 24%. ''Washington Post'' Feb. 28, 2009 </ref> The steep decline continued; GDP in the first quarter of 2009 (January-February-March) fell at the annualized rate of 6.1%, much worse than expected. American business slashed capital investment at an annual rate of -38%. Investment in software and computer equipment declined by an annualized 33.8%, and investment in new buildings was down 44.2%. On the slightly optimistic side, financial markets that spiraled out of control late last year are stabilizing, and declines in retail sales and orders by manufacturers are no longer posting record declines.<ref>An "annualized rate" is four times the actual quarterly rate. Jack Healy, "U.S. Economy in 2nd Straight Quarter of Steep Decline," [http://www.nytimes.com/2009/04/30/business/economy/30econ.html?_r=1&hp ''New York Times'' April 29, 2009]</ref>
In the U.S. GDP fell in the fourth quarter of 2008 (October-November-December), by 6.2% annual rate, with declines heaviest in business investment, exports, finance, autos, housing, construction, and retail sales.<ref>Three of the four engines of economic growth -- consumer spending, business investment and exports -- declined sharply. Consumer spending fell at an annualized rate of 4.3%; business investment in equipment and software sank at an astonishing annual rate of 29%; exports of goods and services plunged 24%. ''Washington Post'' Feb. 28, 2009 </ref> The steep decline continued; GDP in the first quarter of 2009 (January-February-March) fell at the annualized rate of 6.1%, much worse than expected. American business slashed capital investment at an annual rate of -38%. Investment in software and computer equipment declined by an annualized 33.8%, and investment in new buildings was down 44.2%. On the slightly optimistic side, financial markets that spiralled out of control late last year are stabilizing, and declines in retail sales and orders by manufacturers are no longer posting record declines.<ref>An "annualized rate" is four times the actual quarterly rate. Jack Healy, "U.S. Economy in 2nd Straight Quarter of Steep Decline," [http://www.nytimes.com/2009/04/30/business/economy/30econ.html?_r=1&hp ''New York Times'' April 29, 2009]</ref>
The stock market fell by 50% in 2008, wiping out trillions of dollars in assets. More trillions were lost as housing prices fell by 20%. Adding together the declines in housing and the stock market, the net worth of American households declined from $63.7 trillion in January 2008 to $51.5 trillion in January 2009, a decline of $11.2 trillion or 18%. That is, Americans owned $11 trillion less wealth, and adjusted by buying less and investing less. Meanwhile mortgages and credit-card debt together reached $13 trillion, or 123% of after-tax income, a huge jump since 1995, when it was 83% of income.<ref> see [http://online.wsj.com/article/SB123687371369308675.html?mod=djemalertNEWS S. Mitra Kalita, "Americans See 18% of Wealth Vanish," ''Wall Street Journal'' Mar. 13, 2009]</ref>
The stock market fell by 50% in 2008, wiping out trillions of dollars in assets. More trillions were lost as housing prices fell by 20%. Adding together the declines in housing and the stock market, the net worth of American households declined from $63.7 trillion in January 2008 to $51.5 trillion in January 2009, a decline of $11.2 trillion or 18%. That is, Americans owned $11 trillion less wealth, and adjusted by buying less and investing less. Meanwhile mortgages and credit-card debt together reached $13 trillion, or 123% of after-tax income, a huge jump since 1995, when it was 83% of income.<ref> see [http://online.wsj.com/article/SB123687371369308675.html?mod=djemalertNEWS S. Mitra Kalita, "Americans See 18% of Wealth Vanish," ''Wall Street Journal'' Mar. 13, 2009]</ref>
Bankruptcies among small businesses soared from 206 a day in Dec. 2007 to 357 a day in March 2009. In April, 2009, came the largest real estate bankruptcy in history, as General Growth, which owns and manages more than 200 malls, proved unable to handle its crushing $27 billion debt load. The debt was created by heavy borrowing in optimistic days to build new new malls.
Bankruptcies among small businesses soared from 206 a day in Dec. 2007 to 357 a day in March 2009. In April, 2009, came the largest real estate bankruptcy in history, as General Growth, which owns and manages more than 200 malls, proved unable to handle its crushing $27 billion debt load. The debt was created by heavy borrowing in optimistic days to build new new malls.
Wealth levels plunged worldwide. Stock markets in other major countries fell even faster than the U.S. Most companies worldwide reported reduced sales and sharply reduced profits, as banks refused to lend and consumers refused to spend, fearing the worst.
Wealth levels plunged worldwide. Stock markets in other major countries fell even faster than the U.S. Most companies worldwide reported reduced sales and sharply reduced profits, as banks refused to lend and consumers refused to spend, fearing the worst.
A series of emergency measures enacted by the Federal Reserve (on its own authority) and Congress after heavy prodding by presidents Bush and Obama resulted in trillions of dollars in loans, banking bailouts and guarantees, a half-trillion new stimulus spending and a third of a trillion in tax cuts, but by mid-March 2009 the outlook remained bleak as the economy continued downward. Therefore the Federal Reserve announced yet another trillion dollar plan on March 18, this one to buy $300 billion in Treasury bonds, and $750 billion in mortgage-backed securities. The idea was to keep mortgage rates low in the hope people will start buying houses again, but the problem is that the prices are falling, so that if a person buys a $500,000 house today it will be worth $400,000 in a year, despite the Fed's intervention.
A series of emergency measures enacted by the Federal Reserve (on its own authority) and Congress after heavy prodding by presidents Bush and Obama resulted in trillions of dollars in loans, banking bailouts and guarantees, a half-trillion new stimulus spending and a third of a trillion in tax cuts, but by mid-March 2009 the outlook remained bleak as the economy continued downward. Therefore the Federal Reserve announced yet another trillion dollar plan on March 18, this one to buy $300 billion in Treasury bonds, and $750 billion in mortgage-backed securities. The idea was to keep mortgage rates low in the hope people will start buying houses again, but the problem is that the prices are falling, so that if a person buys a $500,000 house today it will be worth $400,000 in a year, despite the Fed's intervention.
In the first quarter of 2009 (January 1 to March 30), GDP fell sharply n major countries compared to the fourth quarter of 2008. In the US GDP was down 6.3%.
In the first quarter of 2009 (January 1 to March 30), GDP fell sharply n major countries compared to the fourth quarter of 2008. In the US GDP was down 6.3%.
Major export countries have seen their markets shrink. Exports from Japan were down 41% (quarter one 2009 versus 2008), Germany 32%, China 20% and U.S. 22%.
Major export countries have seen their markets shrink. Exports from Japan were down 41% (quarter one 2009 versus 2008), Germany 32%, China 20% and U.S. 22%.
Major countries are experimenting with Keynesian stimulus packages, including the US ($787 billion), Europe (EU, $634 billion), China ($586 billion), and Japan ($486 billion), but so far no positive results have been reported. Central banks (such as the Federal Reserve in the U.S.) have cut interest rates to nearly zero, but few are borrowing money.
Major countries are experimenting with Keynesian stimulus packages, including the US ($787 billion), Europe (EU, $634 billion), China ($586 billion), and Japan ($486 billion), but so far no positive results have been reported. Central banks (such as the Federal Reserve in the U.S.) have cut interest rates to nearly zero, but few are borrowing money.
==Indicators down==
==Indicators down==