The Great Recession

Riggs, Kate. The Great Recession. Part of the Turning Points series. 2017. 48p. ISBN 978-1-60818-749-2. Available at 330.97 RIG on the library shelves.

The worst economic downturn since the Great Depression officially took place from December 2007 to June 2009, but the effects of what became known as the Great Recession continued for much longer and, some could argue, are still being felt by many. What started as exuberance in the housing market ended with the bankruptcy of Lehman Brothers and the collapse of stock prices throughout the world.

Low interest rates and easy credits were at the root of the Great Recession. Low interest rates led to low mortgage rates, and these in turn enticed people who before could not have afforded a house to enter the market and purchase one through what became known as a subprime mortgage. For almost a decade house prices continuously rose, so that though a buyer purchased a house with little to no money, that individual could turn around a year or two later and sell it for a profit. However, by 2007 house prices were no longer rising.

In the past this drop in the housing value nationwide would not have affected the rest of the market, but banks had cleverly wrapped subprime mortgages into bonds that were then sold. With rising values, there was no problems in repaying the bondholders. But that drop in value caused the bonds to lose their own value, and suddenly banks and institutions that held these instruments saw their balance sheets turn red.

The Federal Government had to massively intervene in the marketplace to restore confidence, but it had to do so by bailing big banks and rich folks, something that the average American did not like. As the economy continued to contract, companies laid off workers, house values plummeted, and stocks devalued, causing even more pain. By the time the Great Recession was done, the richest folks had seen an increase in their wealth, while middle class Americans had seen a huge decline.

The economic calamity of our time, the aftermath of the Great Recession continues to affect individuals and companies, and many people who entered the workplace during the Great Recession will never be as comfortable financially as their parents, something that has not happened before.

Other books in this series include The Arab Spring.