Economic Meltdown in US

Readers Question: ok my question is about the economic meltdown in the states, the possible causes (including iraq n afganistan),the main component that contributed to the disaster,the government policy that was partialy responsible for the failure and the measures that are being taken to fix the economy and what is in the pipeline?

Causes of Economic Recession.

Housing Bubble and Bust. Here I explain why the US housing market experienced a rapid boom then bust. The rise in mortgage arrears was a key issue in undermining the financial / banking system. The fall in house prices was a key issues in reducing consuming spending and leading to recession (effect of fall in house prices)

Iraq and Recession. In this post I argue that the invasion of Iraq was not a cause of the current recession and credit crisis. (this does not mean I supported invasion of Iraq, but, that the war had little effect on the economic crisis.)

Failed Government Policy

• Failure to regulate subprime mortgages and general mortgage industry
• Failure of regulators to asses risk (e.g. of mortgage bundles)
• Failure to Regulate credit boom in banking sector.
• Encouraging Freddie Mac and Fannie Mae to underwrite mortgage lending to many new homeowners which encouraged unsustainable mortgage lending.

Failure of Federal Reserve

• Keeping interest rates too low for too long in period 2001-2005. Would be good to consider the Taylor rule during this period.
• See: Mistakes of Alan Greenspan

Related

• What Went Wrong with US Economy
• Essay on the credit crunch
• US National Debt