Economics: the Crash

Economics: the Crash


Patrick Freeland

Dr. Moore

November 28, 2008

The Crash

Beginning September 16, 2008 fifteen major banks failed in the U.S. due to exposure of securities of packaged subprime loans and by the newly created credit default swap issued to insure these loans and their issuers. When it comes down to the fundamentals of America’s economy it’s obvious that the blame of this event should be laid upon the top officials and executives of the stock market, granted that there were many players involved in the collapse: bank executives/ lenders, mortgage brokers, appraisers, securitization specialists, rating agencies and borrowers. But could of this recession have been avoided or at least been smoothened? It’s a heated debate among economists but it really relies on the circumstances of the current economy.
There is a natural cycle in every economy, which can be foreseen in the United States current economic conditions. The natural cycle is subject to “booms” in the economy, high growth, and then followed by repercussions of a low growth point or possible recession. Looking at history it seems that although it is not possible to smoothen a business cycle, it is possible to minimize the fluctuations to avoid an actual downturn or at least prevent some major volatility in the system. This is credited to the more sophistication of government and their better knowledge of the functions and foundations of an economy.
December 1, 2008 the United States officially declared that we were enduring a recession, forecasting it as the biggest economic crisis since the end of World War II. It’s not just this country’s problem. It’s naturally a global crisis because of the interdependence of world economies; not to mention the U.S. economy remains the most influential economy in the world. Although the status of our economy is experiencing unprecedented problems, decreasing GDP isn’t the only panic, many of the problems we currently face are...

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