Question

What caused the global economic crisis in 2007-2009? Explain the details of economic system, including public policy, and the ways in which that generated the environment for economic collapse. What was the policy response to the crisis (what did the government do to stop the crisis) and did that response help? Can we prevent another crisis like this in the future? Why or why not?

What is the nature of our food system and how has it been designed to hide it nature from the average consumer? What are some of the alternative systems to our current food system and what are the barriers (economic, political, etc.) to adopting those alternative?

Answer 1

ANSWER-1)

During the early 2000s, the reduced rates of mortgage and expanded access to credit made homeownership possible for higher number people, consequently there was a rise in the housing demand and as a result the house prices increased. From increased securitization of mortgages there was a boost in housing boom. . There was a rapid expansion of securitization of riskier mortgages, including subprime mortgages offered to poor credit records borrower. In early 2006 the prices of house faltered thus it meant that owners of home owed more on their mortgages than their homes were worth. An increasing number of delinquencies on subprime mortgages were a wake-up call for the investors as well as lenders that several residential mortgages were not nearly secure. As millions of mortgages in U.S. were repackaged as securities, there was wide spread of losses across the world. It was a tough task to know the value of several mortgage-related securities and loans. Furthermore the widespread usage of exotic and complex financial instruments made it even more difficult to determine vulnerability of financial institutions to losses; and led to huge disruptions in the wholesale bank lending market. In December 2007 the economy of U.S. entered a recession, a period wherein the level of activity in an economy was shrinking. To summarize the Great Recession and economic crisis of 2008 was caused by greed by homeowners and homebuyers; mortgage brokers and lenders; and financial institutions.

The Bush administration could have avoided, or reduced the effects of, massive financial crises, if they had acted in time. Administration could have reduced the outsized fiscal deficits that spurred foreign borrowing, thus could have acted to slow an overheated economy. The Federal Reserve could have raised lending rates, as a result would have prohibited homeowners to borrow money, and thus decelerated the credit boom. More robust financial regulation i.e. being more stringent about implementing prudential principles to all of the complex financial operations in which financial institutions were engaging. But instead, none of these government agencies did anything

The United States, like several other countries, enacted fiscal stimulus programs that used different combinations of tax cuts and government spending. Such programs included the American Recovery and Reinvestment Act of 2009 and the Economic Stimulus Act of 2008. With a systematic combination of tighter monetary and fiscal policies through an approach of mixed economic policy, tighter financial regulation, and robust controls over the credit rating institutions and the shadow banking system, United States fought the Great Recession of 2008

The world’s banks are mostly stronger now in comparison these were on the eve of the last financial crisis. The economy of U.S. now is a more stable, resilient, and stronger economy than before the 2008 financial crisis. The Fed's quantitative easing program and low fed funds rate would not cause hyperinflation in the near future. The stock market hit new highs in the year 2015 and 2016. The stocks prices are based on corporate earnings therefore are the sign of business prosperity. Also the consumer confidence hit a nine-year high in the year 2016. Consumer spending also drives nearly 70 percent of the economy. Thus I don't feel that another financial crisis could happen in near future