Great Recession That Started in the U.S.

¶ … Great Recession that started in the U.S. In 2008 and continued by affecting the global economy is often compared to the Great Depression of the 1930s. The complexity of the crisis has determined specialists in the field to identify several causes that led to this crisis. These specialists agree upon the fact that the crisis was caused by the significant increase in the housing rates combined with declining prices in the real estate business.

Homeowners lack of sufficient savings did not allow them to support these loans, and they also did not want to sell their houses for lower amounts in comparison with their mortgage level. As a consequence, they were forced to foreclose. This situation determined a series of problems for the banks that had bought mortgage backed securities and that were losing important amounts of capital because of the high rate of foreclosures. In order for them not to affect their reserve, these banks significantly reduce the lending process between them.

The situation determined a series of governmental bailouts and bankruptcies. The effects of the crisis did not stop there. The unemployment rate significantly increased and numerous companies were forced to reduce their activity. The recession significantly affected the government, companies, and American families. The effects on American families are revealed by several reports and surveys (Warner, 2010). Some of these reports have revealed that more than half of adults enrolled in the U.S. workforce experienced problems at work, like pay reductions, working hours reductions, or periods of unemployment.

Governmental sources also reported that the average American household benefitted from reduced incomes by 20%. In addition to this, 20% of the countrys population benefitted from household incomes reduced by 25% or more. In addition to the financial problems, American families were affected by social issues. Given the fact that individuals are working longer hours, the birth rate has decreased. The divorce rate has been reduced also, but not because people are characterized by the unity that the government appeals to, but because divorces are quite expensive in most of their situation.

Conflicts within the family and the domestic violence associated with it have also increased. The quality of marriage has been proven to be influenced by financial stressors. A survey conducted by the University of Virginia reveals that marital happiness is reversely proportional with the number and impact of financial stressors. However, about half of the participants in the study consider that recession has not brought financial stress to their marriage, and that the recession has determined them to increase their commitment to their marriage.

An important number of participants in the study disagree with this opinion (University of Virginia, 2011). Although the poverty determined by the recession affected millions and Americans, the most affected categories are represented by minorities. The number of Americans that benefit from health insurance has been reduced as a result of the recession. The poverty of some of these people was attenuated by the governments unemployment benefits.

The programs developed by the Obama administration helped save and create millions of jobs, helped reduce the increasing rate of poverty, and extended the tax reductions in order to include a larger number of households (Boushey et al., 2010). Another effect of the great recession on American households is represented by the reduced consumption of individuals. Given the fact that their incomes significantly reduced, families and individuals had to modify their purchase behavior in accordance with their needs and fin possibilities.

This situation characterizes individuals with reduced incomes in most countries affected by the crisis (Hurd & Rohwedder, 2010). Therefore, individuals were forced to ensure the primary and secondary categories of needs with their reduced income. Their monthly spending on food, prescription drugs, health care services has reduced. In addition to this, the recession has also influenced peoples retirement plans. In other words, numerous individuals in this situation suffered from retirement accounts reductions.

Unemployed individuals are likely to be significantly affected by their situation because their retirement resources will be reduced, in accordance with the reduced incomes during unemployment periods. The countrys economic development strongly relies on the middle class. However, the recession and its effects has determined millions of Americans to risk falling out of the middle class as a result of unemployment and reduced household income. The middle class represents the target of the authorities recovery package.

The most important measures ensured by the program refer to tax reductions, and unemployment insurance and help (Kvaal, 2009). As mentioned above, minorities have been the most affected by the recession. Children are the category that the authorities and public and private organizations should focus on. Child poverty rates are usually quite.