What if you woke up tomorrow with no way of feeding your family? You have a little bit of money saved but not enough to last long term. You are frantically searching for a job but no one is hiring. This is the reality that many Americans faced when the Lehman Brothers global bank crashed in 2008. This crash instigated one of the worst financial crisis’s in United States history. Luckily the United States is slowly recovering, however to this day Americans still see negative effects from the crises. The 2008 economic crash has led to the decrease in United States job growth, global trade power, and home ownership.

To comprehend the effects of the 2008 crash it is important to understand the background of the crisis and how it all began. Starting off, it is good to note that a single event could not have caused such a crisis. It took multiple mistakes to throw the United States economy into turmoil. According to The Economist, the first of these mistakes is “the folly of the financers” (The Economist). “The folly of the financers” happened during “the years before the crises” (The Economist) and was kicked off by financial establishments giving out loans to consumers who may have been underqualified. Looking back on these loans, many of them were very high risk. This meant that the possibility of the borrower to default on his or her debt was substantial. After making these questionable loans, “financial engineers” (The Economist) would turn these bad loans into “low-risk securities by putting large numbers of them together in pools” (The Economist). This in simpler terms means that the bigger banks in our country would take groups of these mortgages and pool different loans from different parts of the country to lower the risk of the individual loans. After this, the banks would then sell off portions of these pools as securities to investors. This theory was based on the big banks believing “that the property markets in different American cities would rise and fall independently of one another” (The Economist). This eventually backfired when “in 2006, America suffered a nationwide house-price slump” (The Economist). There are many different theories of why housing prices in the United States declined. The Economist states one of the leading theories is the federal reserve was “keeping short-term rates too low, pulling longer-term mortgage rates down with them” (The Economist). This decrease in mortgage rates cause a “chain reaction [that] exposed fragilities in the financial system” (The Economist). After all this happened, the pool of securities began to decline in value. This created a ripple effect which then led investors to not “trust” (The Economist) the banks investment opportunities. At the same time this distrust was occurring, the “Fire-sale prices, in turn, instantly dented banks’ capital thanks to “mark-to-market” accounting rules” (The Economist). And when banks lose capital, they are not able to lend out as much money. This in turn has a negative effect on the economy. Along with the banks suffering, many companies also went bankrupt from the failed investments they made. To summarize this, big banks “had bet on themselves with borrowed money, a gamble that had paid off in good times but proved catastrophic in bad” (The Economist).

Another important cause of the 2008 economic downturn was that regulators were “asleep at the wheel” (The Economist). Regulators of the United States economy are officials of the government who keep an eye on important economic factors. One of the biggest errors regulators made to contribute to the economic crash was “to let [the] Lehman Brothers go bankrupt” (The Economist). The Lehman Brothers was a huge financial services firm with hundreds of billions of dollars in assets. The fact that regulators failed to keep this firm from declaring bankruptcy took a huge toll on the economy. Trust was instantly destroyed in the markets. As a result “nobody would lend” (The Economist). This led to a downturn in the economy as when banks are not lending out capital, firms suffer due to the lack of ability to take out loans to pay expenses. While at the same time consumers don’t have access to fast and easy loans to be able to spend large amounts of capital at firms. After this downturn in the economy the government was then forced to revive multiple companies with bailouts to keep the United States and the world for that matter, out of a depression. 

Considering the events that transpired up to and after the crash, many Americans today argue that the United States job growth is fine. Former president Barrack Obama went so far as to say that “The private sector is doing fine” (Bruce). It is well known that all major powers will come to an end. In the ancient times, the great empire of Rome fell, after that the enormous British empire toppled. And according to Christopher Layne in his article The Global Power Shift from West to East, “When great powers begin to experience erosion in their global standing, their leaders inevitably strike a pose of denial” (Layne 1). This phenomenon is what we are currently seeing when not just former president Obama, but many major political figures try to ease our nerves about job growth. This “pose of denial” has led many Americans to not question the United States job growth as if it were fine. Continuing this thought, former President Obama truthfully claims that the United States in the twenty-seven months leading up to the time of this interview has created “4.3 million new jobs” (Bruce). This, while being a truly impressive feat, does not erase the fact that prior to the 2008 crash job growth levels were at an all-time high.

Since the 2008 market crash, the United States job growth rate has decreased. Though the recovery is in full swing and progressing the job growth rate in the United States has still failed to reach pre-recession levels. According to a chart provided by Business Insider, from 2007 to 2012, the United States average job growth rate has been a loss of approximately 115.2 thousand jobs a month (Business Insider).  While in the 4 years before the crash, the United States averaged an increase of approximately 137.5 thousand jobs a month (Truthful Politics). Considering these statistics, it is impossible to back a claim that the United States job growth is fine. Keeping this in mind, many critics of Obama have stated that this is one of the slowest recoveries in United States history. CNN even went as far to say, “Obama has played up job growth in interviews and speeches about his legacy because it's been particularly strong in recent years” (Long). Keeping in mind that the United States’ economy is slowly recovering, hopefully the job growth rate will return to its former rate. But as of now since the 2008 market crash the United States’ job growth rate has decreased. 

Moving on, many Americans believe that the 2008 crash has not hindered the United States’ global trade power, but in fact has left it with the potential to grow. Global trade power is the ability of a country to produce, import and export goods to other nations across the world. Before the 2008 recession, global trade was at an all-time high in the United States. Our economy was in rapid expansion, manufacturing was booming and the stock markets were steadily rising. After the crash, hundreds of thousands of jobs were lost and our ability to export decreased dramatically.  Many people believe that because the 2008 crash has not only affected the United States, but the world, that it gives the United States a chance to expand their global trade dominance while other countries’ economies are crumbling. They argue that the gaps in global trade left by countries such as Greece, which " became the center of Europe’s debt crisis after Wall Street imploded in 2008” (New York Times), can be filled by the United States. Thereby increasing our trade power rather than the inverse. This theory when taken at face value seems practical but if you analyze if further It quickly falls apart. 

To start off, the United States economy was negatively affected by the 2008 market crash along with the rest of the world and our recovery has been much slower. To save the States from slipping into a depression, the government has had to exponentially increase spending. According to usgovernmentspending.com as of 2004, government spending was around 4 trillion and after the market crash, spending expanded as of 2010 to around 6 trillion dollars and has continued this upward trend to the present day. The expansion of the federal budget had increased the United States debt by trillions of dollars. This had led to the decline in the ability of the government to spend money due to the fear of not being able to pay off their debts This fear of overspending will soon cause the United States economy to decline slightly making it hard for us to expand our global trade power. 

Another reason the United States global trade power has decreased due to the 2008 recession is the fact that countries with rapidly growing economies, such as China, are taking advantage of the 2008 recession to take trade power away from other nations. The Chinese economy has been growing at an amazing rate since the early 2000’s with its gross domestic product or GDP, increasing from 1.198 trillion US dollars in 2000, to 11.008 trillion US dollars in 2015 (The World Bank).  This expansion of more than 900 percent has China leading the charge in taking firms away from foreign countries and having them produce domestically in their own. This results into China taking export power away from other nations to improve their own. And as previously mentioned, a major part of global trade power is the ability to export goods to other countries. So, when China is taking away companies from other countries, they are also taking away portions of that country’s export power. This results in decreasing said countries global trade power. Sadly, The United States is one of the countries suffering from this because due to the 2008 crash the United States job growth rate has been declining. Along with the job rate decline, the mistrust created by the 2008 crash has caused less loans to be given out to businesses to start up and or expand (The Economist). This lack of loans has also pushed business to China where it is much cheaper to pay for labor and infrastructure. The moving of business or export power from the United States to China has led to a decrease in United States global trade power since the crash, and an Increase in trade power for China. 

 Finally, many Americans argue that is was not in fact the 2008 crash that has caused a decrease in American home ownership, but that the blame should be on the affordable housing act of 1992. The affordable housing act was initially proposed by the Clinton administration and was passed into law September 12th ,1992.  This bill aimed at lowering housing prices across the United States so that more families could attain their own home. In 1990, the average house sold for about 148,992 US dollars. After the bill was passed by 1995 the average home price was 157,600 US dollars (US census). This, although the 1995 price is higher, shows that the bill did in fact work because if your account for the 3 percent inflation rate, the 148,992 US dollars in 1990 is the same thing as 171,339 US dollars in 1995.  Therefor the price in 1995 was approximately 13,739 US dollars cheaper. The argument made by those who think the 2008 crash did not cause a decrease in home ownership is that this housing act created an increased demand for mortgage loans. This increased demand led to banks dishing out higher risk loans in order to make more money due to lack of regulation by the government. After these debts could not be paid the houses were then taken thereby decreasing the home ownership rate. 

While this argument does have some truth to it, nothing can change the fact that it is in fact the 2008 crash’s fault for the United States decrease in home ownership. Right in 1995 3 years after the affordable housing act was passed, the United States home ownership rate was about 64.2 percent. This is a pretty high number meaning 64 percent of Americans owned a home at this point on time (US census). Ten years later in 2005 the home ownership rose to 69.1 percent (US census). This is a huge jump in home ownership by almost 5 percent. Putting it into perspective that means that almost 15 million more people owned a home in 2005 than in 1995. This dramatic increase in home ownership during the time of the affordable housing act proves that the law did not cause a decrease in home ownership, but that it did the opposite by increasing it. 

All seemed to be going well for the home ownership rates in the United States until the 2008 recession hit. In 2009, the home ownership rate had dropped from the high point of 69.1 percent in 2005 to 66.5, a drop of almost 3 percent. One of the factors that probably led to this is the mistrust created by the recession. Banks after the crash were a lot less likely to give out mortgage loans since they learned their lesson from the crash about high risk loans. along with this due to the decreased job growth rate due to the recession many people found themselves unable to afford a house or a mortgage payment from lack of work. This continued the effect of the recession until the modern day were housing rates are still decreasing and are as of 2016’s 1st quarter, 63.5 percent, even lower than the number during 1995. This increase in homes after the affordable housing act was passed and then the dramatic decrease after the 2008 recession prove that the 2008 recession caused a decrease in home ownership.  

To conclude, there is still a lot of discussion about the effects of the 2008 recession to this day. Politicians use rhetoric to try to sway public opinion on the matters while many of the same mistakes are happening again right in front of our face. Regulators are failing to recognize faults in our economic system, banks are increasing the amount of loans they give out daily and no one is really blinking an eye. Therefore, people need to be aware of not just what caused the previous recession, but what the negative effects of a recession this huge entail. Loss of job growth, home ownership rates plummeting, and loss of global trade power are still being seen in the United States today because of the 2008 crash. And if we continue to allow the causes of recession to progress, then we may even see worse results the next time it happens. Wynne McLaughlin once said, “Maybe history wouldn't have to repeat itself if we listened once in a while.” (McLaughlin) and I certainly hope that people listen to the 2008 recession and learn from our mistakes and by the effects, and prevent it from happening again.
