How to Prevent the Occurrence of Economic Recession (Essay Sample)

PREVENTING THE RECURRENCE OF ECONOMIC RECESSION
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TOC \o "1-3" \h \z \u Economic Recession3
Impact of Economic Recession on the Banking System3
Impact of Economic Recession on Unemployment rate4
Recommendations PAGEREF _Toc444268294 \h 4
References PAGEREF _Toc444268295 \h 5
Economic Recession
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The 2008 Economic recession is the worst economic crises to have hit the U.S since the Great Depression. The economic crisis came as a result of speculative bubble in the housing industry. Americans invested in mortgage-backed securities heavily due to speculations on the profitability levels in the industry. Investors borrowed extensively from different investment and commercial banks to invest in the real estate sector. However, the collapse of the stock market caused massive losses as Americans lost large amounts of invested funds.[Pettinger, T. (2013) The Great Recession 2008-13 Retrieved from /blog/7501/economics/the-great-recession/]
Impact of Economic Recession on the Banking System
3377565563880Lehman Brothers is one of the major investment banks that were greatly involved in the real estate bubble before the great recession of 2008. Acquiring four different mortgage lenders, the investment bank issued security backed loans to many investors motivate buy the market economic speculation. In pursuit of the American dream of being wealth, Americans borrowed heavily as interest rates remained relatively low. The collapse of the stock market in late 2007 led to the burst of the real estate investment. Stock prices declined significantly leaving investment bank with massive losses over invested creditors’ money. Consequently, overwhelmed by the heavy losses, Lehman Brothers filed for bankruptcy and collapsed.[Michel, N. J. (2013) Lehman Brothers Bankruptcy and the Financial Crisis: Lessons Learned. Retrieved from /research/reports/2013/09/lehman-brothers-bankruptcy-and-the-financial-crisis-lessons-learned] [Pettinger, T. (2013) The Great Recession 2008-13 Retrieved from /blog/7501/economics/the-great-recession/]
Impact of Economic Recession on Unemployment Rate
-29845582295With the collapse of the stock market, many industries suffered massive losses as their share went tumbling down. Investors were rendered poor and suffered an extensive decline in their purchasing power. Industries lacked market for produced goods and services as Americans lost a considerable amount of their income amidst the heavy loans. As the poor market prevailed, workers were laid off as the manufacturing firms could not sustain them adequate market for their goods and services. The Auto industry was the most hit recording an decline in employment by 14%. As a result the unemployment rate increased considerably.[OECD (2008) Impact of the Economic Crisis on Employment and Unemployment in the OECD Countries. Retrieved from /els/emp/impactoftheeconomiccrisisonemploymentandunemploymentintheoecdcountries.htm]
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