Question

1. Explain the Great Recession (2008 global financial and economic crisis). Please clearly and 500 words Andrew Jim Moore

Answer 1

The financial crisis was triggered largely by financial-sector deregulation. Which allowed banks to participate in hedge fund derivatives trading. Banks then requested more mortgages to back these derivatives' profitable sales. They generated interest-only loans which became affordable to borrowers who were subprime.

In 2004, just as the interest rates on these new mortgages reset, the Federal Reserve increased the fed funds rate. Housing prices began to fall in 2007, as demand outstripped supply. That trapped homeowners who had not been able to afford the payments but could not sell their property. When the derivatives' prices crumbled, banks halted each other's lending. That produced the financial crisis that caused the Great Recession.

Many homeowners who were unable to afford traditional mortgages were happy to be eligible for such interest-only credits. As a result, the subprime mortgage rate more than doubled from 6% to 14% of all mortgages between 2001 and 2007. The emergence of mortgage-backed securities and the secondary market led to ending the recession in 2001.

It also created an asset bubble in real estate in 2005. Demand for mortgages has pushed up housing demand, which homebuilders have been struggling to satisfy. Despite these cheap loans, many citizens purchased houses to sell as investments as prices continued to rise. Those with adjustable-rate loans did not know that the rates would change in three to five years' time. The Fed started rising the rates in 2004. The fed funds rate was 2.25 per cent by the end of the year. This was 4.25 per cent by the end of 2005. By June 2006, the rate was 5.25%.Homeowners were hit with payments they couldn't afford. These rates rose much faster than past fed funds rates.

By 2007, the sharp fall in the value of MBSs had inflicted significant losses on many banks, hedge funds, and mortgage lenders, forcing even some large and prominent firms to liquidate hedge funds invested in MBSs, apply to government for loans, try fusions with healthier firms, or declare bankruptcy. Even companies that weren't instantly threatened suffered losses in the billions of dollars, as the MBSs they had so heavily invested in were suddenly downgraded by credit rating agencies, becoming "toxic" (essentially worthless) properties.

Partly because it was difficult to ascertain the magnitude of the subprime debt in any given MBS (because MBSs were usually sold in bits, combined with other debt, and resold as new securities in stock markets in a process that could go on indefinitely), it was also difficult to evaluate the strength of bank portfolios that held MBSs as reserves, even for the bank that had them. Consequently, banks started to question the solvency of each other, leading to a freezing of the federal funds market with potentially catastrophic consequences

Around 2007 and 2009, about 7.5 million jobs were lost, reflecting a doubling of the unemployment rate, which was almost 10 per cent in 2010. While after the start of the recession in 2009, the economy slowly added jobs, decreasing the unemployment rate to 3.9 per cent in 2018, many of the new jobs were lower paid and less stable than those lost.

Targeting racial elites and a political and economic structure that appeared structured to serve the needs of the very wealthy the "1%," as opposed to the "99%"—the campaign created consciousness of economic injustice in the United States, a powerful problem that quickly became a subject of Democratic political discourse at both the federal and state levels. Partly because the movement did not have unified leadership or any clear objectives, however, it did not result in any substantive changes, much less in the full transformation of "the system" that some of its founders had hoped.