Ethics
The Housing Bubble’s Link to the Great Recession.
A recession is caused by many different factors, not just one. It is the coming together of many different problems, all at one time. Some factors that contributed to this last Great Recession include consumer indebtedness, income inequality, lax regulations and the housing bubble. In this paper we will discuss how the Housing Bubble exacerbated and what is its link to the Great Recession. It is necessary to note that because the bursting continues and because lessons have not been learned from previous recessions, nor this one, the problem may remain for a while, fueling this recession further.
“There is no doubt that Housing troubles have contributed to the recession and continue to keep recovery down. The housing sector in the U.S. played a major role in the recent financial crisis, and in making the recovery from the resulting recession so anemic. In the U.S. we had seen regional declines in home prices during previous recessions, but had not seen a national decline in house prices in the post-war era.”
(Rosengren, 2011).
The Housing Bubble’s link to the Great Recession is great, but it is only one factor. If you imagine the recession as a wheel, the Housing Bubble is one spoke, in the wheel. Each spoke of the wheel helps propel it forward, giving the recession momentum. Once the recession starts moving forward it is very hard to stop it or reverse it.
Housing’s Role in the economy
“And as housing goes, so does the rest of the U.S. economy. As the value of housing increases, the wealth effect kicks in. It’s estimated that consumers eventually spend as much as 5% of the increase in the value of their homes.”(Jenkins, 2012)
Most importantly, housing is a crucial part of the economy. As such, if there is trouble in the housing sector, there will be consequences on the entire economy.
“Let’s start with the basics; such as housing is the largest asset on people’s balance sheets. It provides a means
A recession is caused by many different factors, not just one. It is the coming together of many different problems, all at one time. Some factors that contributed to this last Great Recession include consumer indebtedness, income inequality, lax regulations and the housing bubble. In this paper we will discuss how the Housing Bubble exacerbated and what is its link to the Great Recession. It is necessary to note that because the bursting continues and because lessons have not been learned from previous recessions, nor this one, the problem may remain for a while, fueling this recession further.
“There is no doubt that Housing troubles have contributed to the recession and continue to keep recovery down. The housing sector in the U.S. played a major role in the recent financial crisis, and in making the recovery from the resulting recession so anemic. In the U.S. we had seen regional declines in home prices during previous recessions, but had not seen a national decline in house prices in the post-war era.”
(Rosengren, 2011).
The Housing Bubble’s link to the Great Recession is great, but it is only one factor. If you imagine the recession as a wheel, the Housing Bubble is one spoke, in the wheel. Each spoke of the wheel helps propel it forward, giving the recession momentum. Once the recession starts moving forward it is very hard to stop it or reverse it.
Housing’s Role in the economy
“And as housing goes, so does the rest of the U.S. economy. As the value of housing increases, the wealth effect kicks in. It’s estimated that consumers eventually spend as much as 5% of the increase in the value of their homes.”(Jenkins, 2012)
Most importantly, housing is a crucial part of the economy. As such, if there is trouble in the housing sector, there will be consequences on the entire economy.
“Let’s start with the basics; such as housing is the largest asset on people’s balance sheets. It provides a means
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