Question by LS: What factors contributed to the economic recession?
I am sorry if this seems like a silly / obvious question but I really have no idea.
Just one day I hear ‘oh yeah all these people lost their jobs because of the economy’ and then all of a sudden all this stuff about there being no jobs, yadda yadda.
I honestly have no idea how something like this would have started, so yeah. :]
Thanks!

Best answer:

Answer by Kevin S
Short answer: the economy got overheated and grew at an unsustainable pace. Skyrocketing housing prices, absurd oil prices and tons of debt spending propped up the economy.

Longer answer: Once all the “easy” money disappeared, it all collapsed on itself. Houses that sold for $ 200K in 2000 went for $ 450K in 2005, and are now back around $ 250K (and probably empty). People who were borrowing on their houses soon found themselves severely underwater (i.e. they bought the house for $ 200K, borrowed another $ 100K, since the value had gone up, now they owe $ 300K on a $ 250K house) . They probably ran up their credit cards and managed to buy an “investment” property. So, when one is making $ 50K a year and yet now has $ 500K in debt, they just walk away.

Mortgage doesn’t get paid, credit account goes into default, they stop spending (no cash anyway, no one will give them any more credit). Once a massive amount of ppl stop shopping, and borrowing and fueling their cars, companies begin to miss revenue forecasts. Then they lay people off. Banks, losing money, hike credit card rates and cut limits. Bad banks goes bankrupt, due to their owe “gambling” being overleveraged, like our “citizen”). And the cycle feeds upon itself.

A lot of people will point to the housing crisis for being the beginning, which has it’s own long list of culprits. Banks for lending too much to un- or under-qualified borrowers. The borrowers for getting exotic loans and borrowing too much. The government for being lax and late to address these and other issues. And the list goes on and on…

Answer by Peter K
poor management
local of financial

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