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Recession of 2008

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The '''Recession of 2008''' (also called the '''Recession of the late 2000's2000s''' or the '''Great Recession''') is was a major worldwide economic downturn that began in 2008 and continued into 2010and beyond. It was caused by the [[Financial Crisis of 2008]]; it is was by far the worst recession since the Great Depression of the 1930s. It appears the The worldwide recession hit bottom around September in December 2009; however after five years there are were few signs that the American or world economies have economy started to move moving upward again. Five million of the 8 million jobs lost<ref>The effectiveness of [[Greece]], [[Portugal]] American Recovery and [[Ireland]] remain in serious trouble, while [[China]] and [[Brazil]] have rebounded and are growing rapidly. Concerning the United States economy, proponents Reinvestment Act of [[free market2009|Stimulus]] capitalism declare that : [[Federal Reserve]] Chairman [[Ben Bernanke]] should not have bailed out failing firms and instead should have allowed free market capitalism to quickly recover as it did in the depression of 1920 without government intervention (free market capitalists assert that government intervention merely drags out recessions and depressions).<ref>http://wwwresearch.youtubestlouisfed.comorg/watch?v=zzTXaAXusiI<fred2/ref><ref>http:graph// Job growth under President Obama's first term;] Source: United States Department of Labor.</ref> A 2005 study found that government corporate bailouts are often done for mere political considerations and did not return - despite an increase in population of 10 million over the economic resources allocated exhibit significantly worse economic performance than resources allocated using purely business considerationssame span of time covering President [[Barack Obama]]'s first term.<ref>http[https://papersresearch.ssrnstlouisfed.comorg/sol3fred2/papersgraph/fredgraph.cfmpng?abstract_idgraph_id=676905112809 U.S. Population growth during Obama's first four years in office.] Source: U.S. Census Bureau.</ref>
[[Greece]], [[Portugal]] and [[Ireland]] remain in serious trouble, while [[China]] and [[Brazil]] rebounded and are growing rapidly. Concerning the United States economy, some proponents of [[free market]] [[capitalism]] declare that [[Federal Reserve]] Chairman [[Ben Bernanke]] and the United States Congress should not have [[bailout|bailed out]] failing firms and instead should have allowed free market capitalism to recover as it did in the depression of 1920, which recovered without government intervention (free market capitalists assert that government intervention can drag out recessions and depressions).<ref></ref><ref></ref> A 2005 study found that government corporate bailouts are often done for mere political considerations and the economic resources allocated exhibit significantly worse economic performance than resources allocated using purely business considerations.<ref></ref>Likewise in the U.S. the economy has stabilized but has not shown showed little signs of recoveryduring President Obama's first term, apart from the stock market going up. Serious weaknesses continue continued in housing, commercial real estate, banking, automobiles, and retail trade. [[Unemployment]] continues to worsen, reaching 10.2remained above 8% in til October, 2009 and slipping to 10.0% in November, 2012 with conditions especially poor in California, Michigan and South Carolina.[[Image:Bleak09.jpg|545px|left]]The crisis was worldwide, with major impact in [[Britain]], Europe (that is the "European Union" or EU), [[Russia]], [[Japan]], the oil countries of the Middle East, and the developing world. The economy of the EU (Europe) shrank by 4% in 2009, with unemployment reaching 10%. Ireland, Iceland and parts of Eastern Europe are hardest hit. Britain was hit hard with its major banks in deep trouble. Recovery in Britain remains slow; its GDP fell 5.2% from 3Q 2008 to 3Q 2009.<ref>3Q is the third quarter, or the months of July, August and September.</ref>
The crisis is worldwideGlobal trade declined sharply—by 13% from August 20008 to August 2009, with major impact in hurting exporters such as Germany and Japan. [[BritainChina]], Europe (that is the "European Union" or EU), [[Russia]], [[Japan]], the oil countries has avoided most of the Middle East, and the Third Worldtroubles; it continued to grow at a phenomenal rate (8. The economy of the EU (Europe) will shrink by 49% annual rate in 2009, with unemployment reaching 10%2008-9). IrelandHowever its exports did shrink because of falling world demand, Iceland and parts of Eastern Europe are hardest hit. Britain was hit hard with its major banks in deep trouble. Recovery in Britain has been slow; its GDP fell 5.2% from 3Q 2008 ability to 3Q 2009.<ref>3Q is the third quarter, or the months of July, August fund global stimulus programs are being dampened by lower growth forecasts and Septembershifting priorities to retain capital earnings for domestic development.</ref>
Global trade declined sharply--by 13% from August 20008 to August 2009, hurting exporters such as Germany and Japan. [[China]] has avoided most of the troubles; it continues to grow at a phenomenal rate (8.9% annual rate in 2008-9).  Global governments spent an astonishing $17 trillion to support the world economy in the form of bailouts, guarantees, and equity market purchases. That $17 trillion represents one quarter of global GDP, but only a fraction of that sum will actually be paid out. (How much will not be known afor a few years<ref>One analyst in 2011 put the figure at $29 trillion.) [ $29,000,000,000,000: A Detailed Look at the Fed’s Bailout by Funding Facility and Recipient], James Felkerson, University of Missouri–Kansas City, December 2011.</ref> Global investment declined by 15% , and global GDP by shrank by nearly $4 trillion, or an amazing 6%. Global industrial production in the advanced economies dropped a 15%, causing unemployment to soar around the world, nearly doubling in the United States alone.<ref>David Smick, "Now What Do We Do?" November 10, 2009 [ online] </ref>
==Fannie Mae Origins==:''Main aticle:'' [[Fannie Mae]]The recession began in January 2008 in the financial sector as major banks in the U.S. and Europe got into serious trouble by after a decade and a half of investing in bad mortgages. The crisis spread globally due to the fact that many banks , businesses, and other business pension funds 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. Existing shareholders received 22 cents on the dollar for their investment, and the unions made no concessions.
[[Leftist]]s have incorrectly attributed the cause of the recession to Bush Administration policies, calling it the "Bush Recession." However, many people recognize that it is Obama's failed policies and inaction that extended the recession loosening of credit guidelines in the Clinton era and have prevented a full recovery. Indeed, a government guarantees for [[Googlesubprime lending]] search of "Obama Recession" returns 273,000 hitsencouraged banks to make foolish loans which they considered had minimal risk to themselves. This, whereas together with the phrase "Bush Recession" returns only 126,000 hits as threat of August 14, 2011[[civil rights]] lawsuits under the [[Community Reinvestment Act]] were the mortgage lenders primary motivations.
In the U.S. GDP fell in the fourth quarter of 2008 (October-November-DecemberOctober–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-MarchJanuary–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 sideBy Spring 2009, financial markets that spiralled out of control in late last year are stabilizing2008 stabilized, and declines in retail sales and orders by manufacturers are no longer posting posted 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 ''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 [ 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 owned and manages managed 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 in the U.SUnited States. 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 [[Direct spending|new stimulus spending ]]<ref>These supposed "temporary", "emergency" spending measures by 2013 became permanent features of the federal budget, as the $1 trillion deficit to cover its continuing costs and an accumulating [[national debt]]. [ The Eternal Stimulus,] ''Wall Street Journal'', February 11, 2010.</ref><ref>[,d.cGE Obama's Permanent Emergency:'Temporary' spending becomes permanent,] ''Wall Street Journal'', May 23, 2012.</ref> 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 was that the prices are were falling, so that if a person buys bought a $500,000 house today in 2009 it will would be worth $400,000 in a yearlater, despite the Fed's intervention.
In the first quarter of 2009 (January 1 to March 30), GDP fell sharply in major countries compared to the fourth quarter of 2008. In the US GDP was down 6.3%.
Major export countries have seen saw 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 began experimenting again 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 were reported<ref>[http://online. Jobless Claims Jump in New Sign Recovery Is Sputtering,] ''Wall Street Journal, August 20, 2010.</ref><ref>[ United States Department of Labor], Bureau of Labor Statistics. Data extracted on: July 19, 2010 (4:31:11 PM).</ref> Central banks (such as the Federal Reserve in the U.S.) have cut interest rates to nearly zerofor half a decade, but few are borrowing businesses borrowed moneyto expand employment or meet current operating expenses. By September 2012 when job growth still lagged by 4 million people, economists Garett Jones and Daniel Rothschild wrote,{{QuoteBox|This suggests just how hard it is for Keynesian job creation to work in a modern, expertise-based economy. The stimulus was implemented at a time when the Keynesian model had every chance of succeeding on its own terms. The high level of unemployment and the rapid deadline for spending created both the supply of workers and the demand for workers. If the job market results are so lackluster in this setting, economists should expect even weaker stimulative results during more modest recessions.}}And the ''Wall Street Journal'' observed:{{QuoteBox|The lesson of such on-the-ground knowledge is that the stimulus was a lost opportunity. In practice it became a shotgun marriage between an economic theory justified by computer models and 40 years of [[liberal]] social priorities (clean energy, Medicaid expansions and the rest). This produced the 9.1% unemployment we now have.<ref>[ Why the Stimulus Failed,] ''Wall Street Journal'', September 8, 2011.</ref> }}
==Indicators down==
Oil, metal and grain (rice, wheat, corn) prices, after hitting record levels in the summer of 2008, have plunged. Oil Crude oil went from $145 a barrel to $42.<ref>[ West Texas Intermediate Crude (WTI) 2007-01-01 to 2013-02-01]</ref>
Retail sales in the U.S. and worldwide are in went into a major slump, with the slowest Christmas shopping season in decades. American manufacturing contracted in November 2008 at the steepest rate in 26 years. The U.S. lost some 2.6 4 million jobs in 2008, <ref>[ Total Non-Farm Payrolls, U.S. Dept. of Labor].</ref> the worst record since the end of World War II, Factory indexes in China, Britain, Europe, and Russia all fell to record lows.
In January 2009 the downturn worsened, as major companies and small firms announced round after round of layoffs and postponement of expansion plans. The financial sector worsened sharply in January, indicating the the huge financial bailouts of 2008 were not enoughinadequate. The steep slide continued as unsold goods piled up. The GDP (gross domestic product) shrank at a -6.2% annual rate in the fourth quarter (last three months) of 2008, the sharpest contraction in 26 years.<ref>Jack Healy And Louis Uchitelle, "Steep Slide in U.S. Economy as Unsold Goods Pile Up," [http ''New York Times'' Jan. 30, 2009]</ref>
Meanwhile, at the urging of the [[Obama Administration]], Congress passed a $789 billion stimulus package, combining [[Direct spending#New spending|new spending ]] and tax cuts, in the hopes of turning the economy around Keynesian revival by mid-2009. Republicans were nearly unanimous against the proposal, as their smaller package was voted down. Canada, although not as hard hit as the U.S., is preparing prepared its own stimulus package.
*see also [[Economic stimulus package]]
Economists from all political viewpoints predict predicted the slide in GDP is was likely to continue at an alarming pace well into summer 2009 as consumers continue to curtail curtailed spending and businesses reduce reduced their capital investments and cut their payrolls. 
==Income and Wealth==
Wealth holding took a heavy blow. Incomes were down too, but not as dramatically.
[[File:Pers-income.jpg|thumb|400px|Personal income; change from previous year]]
In terms of a monetary explanation, there is far more money around, thanks due to the stimulus programs of the Federal Reserve, Treasury, and Congress. However the velocity (turnover rate) is down to the lowest rate since 1991. That is, people and business are saving and not spending. Banks are not lending. The nation’s nation's banks in March 2009 had reserves of $679 billion, up from only $45 billion in August 2008. Individuals are keeping their cash in the banks, or paying off credit cards and debts, and not buying new merchandise. The goal of federal stimulus spending is to get new consumer spending going, to create jobs and keep businesses from slowing down. <ref>[[Inflation]] can do this -- force people to deplete cash and savings with a "spend now" mentality and damn the consequences of impoverishing themselves and heirs later. Keynes said, "In the long run we're all dead". Keynes is dead, but those alive in 2008 have to live with the consequences of decades of these economic theories elevated to public policy.</ref> If people do start spending again all the extra money will cause inflation, but in that case the Federal Reserve plans to reduce the money supply and, hopefully, restore normalcy and prosperity.<ref> Mark Gongloff, “Best Check on Inflation: Broken Banks,” ’’Wall Street Journal,’’ Mar. 20, 2009</ref>[[File:Housing$.jpg|thumb|340px]]
The longest economic slumps since 1945 were the 16-month downturns that ended in March 1975 and November 1982. The [[Great Depression]] lasted 43 months, from August 1929 to March 1933.
"This may be referred to as the Great Recession," because of its length, said Norbert Ore, chairman of the Institute for Supply Management’s Management's factory survey. "It looked like we were headed for a shallow recession earlier in the year because of higher energy prices. With the meltdown in the financial sector, it has become something more serious."<ref>see [http Steve Matthews and Timothy R. Homan, "U.S. May Be in for ‘Great Recession,’" ''Bloomberg News'' Dec 2, 2008]</ref>[[File:Housing$Constr1.jpg|thumb|340px400px|Construction spending--change from previous year]]
see [[Housing]]
The construction of new housing and commercial buildings has fallen off; many commercial buildings and shopping centers have high vacancy rates and may be hard pressed to pay their debts. Housing prices continue low--falling low—falling from an average of $255,000 to $180,000, as millions of empty houses are a drag on the market. Indeed , much of the housing activity in 2009 involved sales of foreclosed properties at distress prices.[[FileImage:Constr1U-2009-2.jpg|thumb|400px275px|Construction spending--change from previous yearright]] 
===Auto sector===
The automobile industry is was in desperate crisis, with General Motors and Chrysler, and numerous parts suppliers, on the verge of bankruptcy. Ford is was in better shape as are were the "transplants" like Toyota and Honda that have factories in the U.S. If GM shuts were to shut down, however, many parts suppliers will also would shut, forcing the end of most US of GM's North American auto production. Autos will would still be imported, though at much higher than former prices. GM and Chrysler were given $17 billion TARP funds in December on condition they present a turnaround plan by Feb. 17, 2009. In its plan GM will ask asked for access to an additional $16.6 billion in federal aid; otherwise will run out of money by March 2009. GM also said it would close 14 U.S. plants, and cut 47,000 global hourly, salaried jobs, and revoke dealerships. Bankruptcy, GM claimed, could cost the federal government the loss of tax revenue and the loss of 1.3 million jobs across the US, as plants and dealers close down operation.<ref>. For the GM plan see [ GM Plan of Feb 17, 2009]</ref>[[Image:U-2009-2.jpg|thumb|275px|left]] In March 2009 GM reported that its auditors have raised substantial doubts about its ability to continue as a going concern, citing recurring losses from operations, stockholders' deficit and an inability to generate enough cash to meet its obligations. GM has received $13.4 billion in federal loans, and the company is seeking a total of $30 billion from the government. During the past three years it has run up $82 billion in losses, including $30.9 billion in 2008. Bankruptcy took place June 1, 2009. ===Unemployment===
 After reaching In March 2009 GM reported that its auditors raised substantial doubts about its ability to continue as a low of 4.1% in Octobergoing concern, 2006citing recurring losses from operations, the Ustockholders' deficit and an inability to generate enough cash to meet its obligations.S. [[unemployment]] rate has been trending upward, reaching 9 GM received $13.4% billion in May 2009. Analysts from federal loans, and the National Bureau company asked for a total of Economic research say that $30 billion from the current nation-wide recession began over a year ago; the economy peaked government. Since 2006 it ran up $82 billion in Decemberlosses, 2007including $30. This recession is expected to continue into 2010. Unemployment reached 6.5% 9 billion in November 2008. Unemployment has already reached 10% and higher in half the country Bankruptcy took place June 1, 2009. With federal help, GM ultimately escaped [[bankruptcy]] law (see [[Crony capitalism]])
After the full implementation of the George W. Bush tax cuts, [[unemployment]] reached a low of 4.1% by October, 2006. After the [[Fannie Mae]] crash, the U.S. unemployment rate began trending upward, reaching 9.4% in May 2009. Analysts from the National Bureau of Economic research say that the current nationwide recession began in December 2007. Unemployment reached 6.5% by election day 2008, and in some parts of the country already reached 10% and higher.
==Worldwide crisis==
The crisis is worse in many other countries, which means they are dragging down the US economy and cannot be expected to be the engine to restore prosperity. Japan’s Japan's economy, the world’s world's second largest after the U.S., is deteriorating rapidly because of shrinking exports and weak domestic spending. Japan's GDP shrank at an annual rate of 12.7% in the fourth quarter of 2008, and the downward plunge shows no sign of reversal. [[Image:Bleak09.jpg|550px]]Japan's exports to the U.S. and other areas are down sharply, causing massive layoffs at companies like Nissan, Toyota, Panasonic and Sony. Capital spending on tools and factories has fallen as companies halted production lines and cut investment. Consumer spending has stalled as Japanese households reduced spending amid the large-scale layoffs. The government has promised a huge bailout package on the order of 50 trillion yen ($545 billion), but has been unable to get it passed in parliament.<ref>Hiroku Tabuschi, "Japan’s Economy Plunges at Fastest Pace Since ’74," [http ''New York Times'' Feb. 15, 2009] </ref>
The economies in Europe and Russia are headed down, as are most third world countries. Eastern Europe is very hard hit, as is Ireland and Iceland. Economic growth in China continues at a much lower pace than usual, throwing tens of millions out of work there. The oil producing nations have seen their revenues plunge with the decline of oil prices.
==U.S. Politics==
The Obama Administration has been basing based its domestic policies on the assumption that the its stimulus package passed in February, 2009, will would turn around the economy. The stimulus money has been spent slowly and little impact is was visible by October212. The Treasury assumes assumed that the tax revenue will would be there to fund [[Direct spending|permanent new spending program ]] programs in areas such as health care and greening the economy. It assumes assumed that the rich will recover enough of their investments to pay new , increased taxes--right now tax . Tax collections are falling sharply as investments turn souronly returned to the 2007 alltime, pre-recession level in 2012. The deficit for fiscal 2009 (which began Oct. 1 2008 and ended Sept. 20, 2009, covering both Bush and Obama terms) is alone was an astonishing $1.4 trillion, or 10% of GDP.To maintain the appearance of business as usual, keep Social Security and disability payments flowing and maintain defence spending, the federal government added $5 trillion to the [[national debt]] with borrowed money from abroad. Obama delayed the recovery and kept unemployment high to permanently expand government spending, and reduce the size and increase the burdens of the private sector.<ref></ref> In the words of [[Rahm Emanuel]], "you don't want a crisis to go to waste."
Obama's policies are delaying and retarding the inevitable economic recovery, keeping unemployment high even though the recession Obama inherited was similar to others in the past that gave way to rapid recoveries.<ref></ref>
The vast majority of the world's economists and economic forecasters&#8212;whether liberal or conservative&#8212;were caught unawares unaware by the [[housing bubble]] and the banking crisis. Nearly all misjudged the depth of the economic downturn; they were baffled by the inability of orthodox monetary policy administered by the Federal Reserve to prevent such a steep downturn. They could not agree on what, if anything, the government should do to halt it and return to recovery. By 2010, most economists are many were in general agreement with the Obama administration's Keynesian strategy. However, some say the government is not doing enough and is too cozy with the bankers, while others say that it is doing too much and warn about a lackadaisical recovery and dangerous long-term consequences. Added to that, implementation of [[Obamacare]] beginning in 2013 increases more burdens forecasted to retard job growth and lower tax collections. There is no professional consensus on the details of what should be done to end the downturn, speed recovery, or prevent a recurrence.
==See also==
*[[Recovery Summer]]
{{Economic preparedness topics}}
[[Category:Economic Preparedness]]
[[Category:Economic historyHistory]]
[[Category:United States History]]
[[Category:Reagan Era]]
[[Category:Obama Administration]]
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