Darius: Financial and Economic Crisis

The Economic and Financial Crisis in USA

As a project for the newstalk class, Aina, Je and I went to interview two professors in the Economics Department of the Southern Illinois Univerity about the causes and consequences of the financial and economic crisis. The interview also covers actions taken by US authorities to solve the problem and their effectiveness.
According to those two experts, the crisis began in the housing and the banking sectors. People were taking a lot of mortgages to buy houses and banks were landing money to them even if they were not qualify. As prices of houses raised throughout the past years, both banks and people tought they would be able to sell those houses and make a substantial profit on them.
But the concequences of the war in Iraq, a raise in energy cost and fosil fuel hit the economy of United States American and the other MDCs very strong. Rapidly people were forced to sell their home in other to face their financial problems; and banks took over a lot of houses whose owners were unable to pay thier mortgages. However even the bank faced problems to sell thoses houses. As houses were decreasing rapidly it became more profitable to let a bank take over once home and to buy and an other than to keep on paying the mortgages. So, many banks collapsed because that and because of bad placements they made in unsustainable affairs.
With the theory of general equilibrium in economy, which stipulates that all sectors in the economy are connected, people who used to work for the housing sectors as plomber, electritian, home agent etc..., lost their jobs and started lookig for employements in other sectors. This situation had two consequences; the surplus of people seeking for jobs in other sectors causes a decrease in salary in those sectors and with less jobs and less money people were buying less and other sectors had to cut off staff because the decrease in the demand of goods and services. The crisis became general.
To solve this problem the US government came with stimulus plan for the banking system and tax return for households in other to stimulate both people to buy more and small business to hire more. The result of US stimulus plan and tax r return is a positif recovery of the economy and a stabilization in the banking sectors. However, unemployement is still high as it is the last sector to recover after an economic crisis.