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What contributing factors led to the economic recession presently?
Wiki User
∙ 15y ago
A complete seizure of economy may be the word recession, Reason as such may be due to:
Human psychology to acquire more wealth than required, regardless of who contributes to next series of human beings to do so, even though none can enjoy it in their own life time.
Ultimately a GREEDY society to block the economy either by huge investments without any returns, or by lavishly spending expecting more returns etc.
The Sub-prime Mortgage Crisis is an ongoing economic problem that had become more apparent in 2008 and has resulted in reduced liquidity in the global credit market and also the banking & financial systems. This crisis has exposed the weakness in the global financial system and also the regulatory framework that is overlooking them.
Some of the reasons for this crisis are:
1. The US Real estate market crash
2. High default rates on Sub-prime loans &
3. Sub-prime Mortgage backed securities
A Sub-prime loan is a loan that is granted to a borrower who does not qualify for loans owing to a variety of risk factors like low income level, bad credit history etc
Wiki User
∙ 12y ago
Wiki User
∙ 15y agoEasy credit.
There were several factors, but the main ones are the fact that our dollar is no longer backed by solid value (gold), the Federal Reserve artificially drives down interest rates encouraging people to invest and spend money they don't actually have, and buying assets over and over until nobody was sure if they were actually worth anything or not. Easy credit is at the heart of all these.
We were spending money we got on easy credit instead of living within our means.
Our money is no longer on a gold standard (when the bill you hold is actually representative of an amount of gold in the bank), and the only thing that gives it its worth is the belief that it is worth something. As such, when the Treasury prints money or the Federal Reserve (the Fed) injects money into the system, prices go up causing inflation and the dollar is devalued. Mix into that the easy credit housing bubble, you get a recipe for disaster.
P.S. On an unrelated note, "presently" actually means "in the very near future," not "right now." Ex: I am presently saving this answer. But I have already written it and have not yet saved it. I am "presently" saving it (meaning in just a minute or so).
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