Q&A: Causes of recession?

Question by jeeby: Causes of recession?
What is the cause of the most current recession?

Ideal answer:

Answer by Indiana Frenchman
recession happens when there is a fall in financial development for 2 consecutive quarters, nevertheless if development is extremely low there will be improved spare capacity and men and women will really feel there is a recession, this is at times recognized as a development recession.

If there is a fall in AD then according to Keynesian analysis there will be a fall in Genuine GDP. The effect on Genuine GDP depends upon the slope of the AS curve if the economy is close to full capacity reduce AD would only lead to a tiny fall in Real GDP.

see net web page for far more including diagrams and so on

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Since a new economists’ study traces the roots of the Recession to the 90s, is Clinton more to blame than Bush?

Question by Richard RIGHT: Since a new economists’ study traces the roots of the Recession to the 90s, is Clinton more to blame than Bush?
This study says it all comes down to there being nothing to back inter-bank loans: “The REPO market of interbank loans had always existed but it grew dramatically in the 1990s to support securitization. But since there was no deposit insurance for institutional loans measured in hundreds of millions of dollars, counterparties demanded collateral to back these overnight REPO loans that generally replaced demand deposits in the banking system.”


Best answer:

Answer by Paul Grass™
Absolutely he is, so is the Democratic controlled congress

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Q&A: What caused the US to go into a recession?

Question by nothing: What caused the US to go into a recession?
Why do we have a recession in the US right now?
Thanks for all answers in advance!

Question #81

Question(s) that have been deleted by me because they weren’t numbered right- numbers 2, 16

Question(s) that have been found to be violations- numbers 40

Question(s) that were deleted because no one answered them- none yet

Best answer:

Answer by jason d
It started from the sub-prime lending. Basically countrywide and other large lenders were giving out mortgages to anyone that was applying for them. To transfer this risk on the buyer they often had adjustable rates built into them. As often happens after a couple years as interest rates rise so do the payments. Many of these households began defaulting on the loans. This was exascerbated since the companies like countrywide package mortgages up and sell them off in a process called securitization where they are supposed to classify them into tranches which are good/fair/poor quality. Well instead of classifying these correctly they lumped them all together. When large wallstreet firms like merrill lynch buy these securities and sell them to mutual funds investing in fixed income (like mortgages and bonds) these funds were buying poor quality misleading securities. As more people began defaulting on their loans a lot of people flee from the market to protect the equity they have left. This is exactly opposite what they should do, but investor psychology often gives way to these wild swings. So the government will continue to lower interest rates which will in turn get more people and more importantly businesses borrowing as it becomes a cheaper and cheaper source of financing to businesses. This in turn (theoretically) will lead to cheaper goods for consumers and ultimately get us spending more. Everything in economics is cyclicle.

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Q&A: Did the housing slump or oil prices play a greater role in causing the recession?

Question by chacalaka: Did the housing slump or oil prices play a greater role in causing the recession?
How does the rise in unemployment and the state of other economies in the world contribute?

Best answer:

Answer by oldtimer
The United States Congress bears the biggest burden of the recession. Regulation and legislation forcing mortgage companies to loan money to people with no hope of being able to afford the homes, making it mandatory to loan to anyone considered a minority whether they were credit worthy or not.
Two names are at the root: Chris Dodd and Barney Frank.
The very temporary oil price spike should again be lain at the feet of our congress. Were they halfway competent and knew anything about trade and commerce, drilling in the “US would have prevented the runup.

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Q&A: Do conservatives really think this recession was caused by regulation?

Question by Wtfsthe Deal: Do conservatives really think this recession was caused by regulation?
Deregulation allowed the merger of banks that created banks that would be systemic risks if they failed
Deregulation allowed massive increases in financial liabilities of banks, through relaxed leverage limits, and led to insolvency after capital reserves decreased by just a few percent
Deregulation allowed the bribery of the ratings agencies
Deregulation allowed the fraudulent trading of derivatives
Deregulation allowed the securitization of mortgages, which encourages predatory lending
Deregulation allowed several insurance policies to be taken out on the same derivative, which brought AIG to its knees.

How on earth could anyone think that regulation caused this crisis?
Being forced? Are you really talking about the community reinvestment act? What a joke.

The securitzation of mortgages relieves local and investment banks from the responsibility if loans they make dont get paid. It placed all the responsibility on the investor and on AIG, and eventually became a system than encouraged the signing of sub prime loans, just to increase the volume of collateralized debt obligations being packaged and sold. It encourages predatory lending. Relaxed limits on leveraged allows banks to loan out as much as 30 times as much as they actually owned, as opposed to the normal 7 times before the conservatives had their way. If banks werent allowed to loan out that much money, as they hadnt been for years, a small decrease in their capital wouldnt have equated to a huge drop in their reserves to liabilities ratio, and they would have remained solvent and never even needed a bailout.
“What both sides fail to understand is that none of this would have happened if Congress didn’t change the laws set in place during the Great Depression.”

Republicans repealed those laws!!! Republicans repealed glass steagle, made derivatives illegal to regulate, and relaxed leverage limits!!! democrats understand it perfectly well.

Best answer:

Answer by shea c
its all Obama fault

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