The Current Economic Situation - Global Recession - The Cause of the Current World Financial Crisis

The primary cause of the current recession and economic crisis was the drastic increase in subprime adjustable-rate mortgages and the CDO's (collateralized debt obligations) that they comprised. The number of subprime mortgages issued in 2005 and 2006 increased dramatically while prime mortgages decreased.

Mortgages are securitized by the federal government; they are pooled together and sold in sections, which spreads the risk and uncertainty to those who take part (nearly everyone). It created a huge web of risk in that the securities are dependent on the underlying mortgage values. The value of the CDO's and their securities decreased and were miscalculated to begin with. Rating agencies could not accurately determine the value them. This is why so many people lost nearly all of their retirement which was largely based on these securities.

Worst of all, the federal government actually encouraged the purchasing of these securities without knowing the underlying risk involved. The web of risk was spread worldwide, not just in the United States. Major institutions like AIG, Citi, Chase, Bear Sterns, etc. held many of these CDO's, and many aspects of society all around the world were dependent upon these huge corporations, thus basically when they failed, society failed.

The Current Economic Situation - Global Recession - The Cause of the Current World Financial Crisis

On the surface level, borrowing and lending also was at an all time high in the past few years. Many people cite the Federal Reserve, Inflation, and the money supply as causes (as if that means something), or random phrases they here on the news, thinking they know what they're talking about, but these things are not really related to the whole situation at all.

The Current Economic Situation - Global Recession - The Cause of the Current World Financial Crisis
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Tyler runs a site about basic principles of economics. He also has a site about finding affordable motor car insurance [http://www.carinsurancebuzz.com/]. His site is called Car Insurance Ireland.

Economic Downfall

Gas prices, taxes, stock market deflation, bills, groceries, and mortgages. What are we to do in this agonizing economic crisis? President Obama has honestly tried to aide us with his new stimulus package and company bailouts, but has it truly helped discouraged Americans? The government has provided us with food stamps, SSI, and WIC for mothers and young children, but is this really enough?

With the assistance of financial expert Dave Ramsey and scholarly economical advice from radio personality Rush Limbaugh, many Americans are learning to "penny pinch" and budget their hard earned money responsibly. Dave Ramsey teaches the infamous "envelope tactic." The "envelope tactic" is where a person categorizes the money they earn for all of their needs, wants, and bills into individual envelopes. Each time one earns money they divide that money into each separate envelope and only use the money in each envelope for that designated purpose. For example, the envelopes could be categorized by utilities, car repairs, groceries, retirement, gas money, household items, bills, and even for recreations to indulge and splurge on when they have done well and saved wisely.

Economics

President Obama's stimulus package has been greatly appreciated by some Americans, but for many others, it has only caused distress. This depresses numerous American families and causes many households to go into debt and are forced to file for bankruptcy. So many hard working Americans are not only diligently trying to cut back and budget responsibly, but are also hoping and praying for a miracle of some sort in this diabolical uproar.

Economic Downfall

Also, in this traumatic recession, many communities are opening more thrift shops and donating items as well as having food drives. Citizens look at these blessings and are extremely grateful. In these heart wrenching tough times, we Americans would be wise to stick together. Another sanction in this financial hardship: Community Schools are having free and reduced lunch programs for under privileged children, whose parents cannot provide much money.

In conclusion, I add that though the times are definitely tough, we need to wait patiently because this great nation always prevails. There is nothing that the United States cannot overcome. Through the Great Depression, many horrific wars, nuclear explosions, terrorist attacks, and numerous terrorist threats, the U.S. have overcome the odds and have remained United, therefore we should have faith that we will come out of this financial funk.

Economic Downfall

My name is Sarah Garrisoncarter. I am nineteen years old and I am an aspiring journalist. I began my writing career in the sixth grade composing poems for the Carl Perkins civic center. After that I wrote articles for an online magazine. In high school I was on the yearbook staff. While on the yearbook staff, I was a photographer, editor, and advertiser.

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