The US Economy

The US Economy  | read this item

The last few years have been very tough for the US Economy. GDP growth has been slow at best. A few quarters even had negative GDP growth. There are a few key reasons why the last few years have been so bad. The first is the tumble in the value of homes across America. That combined with a massive amount of unemployment created hardships for many people. Also, the hard hit stock market even hurt the rich, who have much of their net worth tied to stocks and bonds. With all the poor economic conditions the Obama administration had to take some action to help correct the path.

Trouble had been brewing for years with the housing bubble allowing citizens to use their homes as ATM machines and continually pull out their equity. The increase in the value of homes allowed many people to go further and further into debt. This was fine when prices went up but as soon as home values started to drop people owed more on their homes that what they were worth.

Along with home price declines job losses caused the US economy to suffer even more. With unemployment rates over 10 percent in many areas people struggled to pay their bills. Many lost their homes, cars and whatever else they had. Combined with the home values declining people had nothing to live off of and fall back on while they looked for a new job. Even if they did find a new job many had to take a pay cut.

With all the bad news out there stocks took a huge hit. The DOW lost near 50 percent of its value in a short period of time. Panic was in the air as everyone was selling stocks due to the financial crisis. Combined with the housing troubles, stocks did not stand a chance. Many lost thousands and the bad US economy hurt many people in their retirement hopes. People are working extra hours if possible to make up for their losses.

Those three key events caused a whirlwind effect that greatly hampered the ability for many good companies to still get loans. The prime borrowers then suffered too has they could not grow and expand their businesses. This further hurt the US economy and led the country into a recession.

To combat all these problems in the US economy Obama and Congress passed different legislation that was aimed to bail out businesses, help the homeowners, and make it easy for people to buy a home. These helped get the automakers out of eminent danger of collapsing and helped to spur recovery with the Cash for Clunkers program. Obama tried to help people stay in the homes by offering the Hope for Homeowners program that would try to stop foreclosure from happening unless it is the last resort. Finally, Obama passed a bill to give $8000 to all new first time home buyers. Also, just recently, this credit has been extended and $6500 is now the credit for most current homeowners as well as the $8000 for the first time home buyers.

While some debate the impact of these efforts at least something is being done. The next few years may be tough but these polices have reduced the effect of the recession. A fear of all this is the risk of higher inflation on the back side. There is no one way to fix the problem so there will always be some area of the US economy that is suffering. Hopefully next time it is not this many different problems all at once.

Topics: financial crisis, gdp growth, housing bubble, poor economic conditions, price declines, Recession, selling stocks, Stock Market, stocks and bonds, unemployment rate, unemployment rates