The Housing Sector Crisis and the Possibility of a Double Dip Recession

The liquidity shortfall in the United States banking system resulted in the collapse of large financial institutions and other business firms. This in turn created a domino effect triggering the worst economic recession in the modern era with many countries including major players deeply affected. Because of this, the economies of other countries have significantly slowed as international trade declined and confidence in spending has slowly diminished. The U.S. also incurred a very large budget deficit that threatens the country’s stability in the future.

The home and housing sector is obviously one of the most affected by the recent economic and financial crisis. There was widespread foreclosure as prices of house loans and interest rates soared up. In April this year, the number of home sales went down due to the expiration of federal tax credit given to buyers. Experts and economists are now deeply worried about the possibility of the double dip recession since the economy and the housing market are two different entities that worked with each other.

The fall of the housing sector can greatly affect the stability of the economy and the stimulation of economic growth. According to West Chest, Pennsylvania-based Moody’s Analytics, 15 percent of the gross domestic product during the second quarter was attributed to home construction materials and home furniture and appliances. Also, the housing sector may also influence consumer spending by enabling consumers to receive extra money to buy more goods. In the mid 2000’s, consumers used the equity of their homes to purchase automobiles and take on a holiday vacation.

With over 14.6 million Americans having no work or going underemployed, homeowners are struggling to cope up with their housing loans or in paying for their ownership of properties. Figures showed that one in seven mortgages resulted in foreclosure in the first quarter. Although Pres. Obama has already implemented the Home Affordable Modification Program, there are still a lot of instances where the consumer defaulted on the loan. The unstable economy has forced homeowners to default and instead chose to save more money for future use.

Previous economic recessions make use of the housing sector to generate economic growth and encourage consumer spending. That is not the case today as people are losing hope with fewer jobs available in the market. If the housing sector continues to fall with little positive effects done by Obama’s Home modification program, the country may well be experiencing a double dip recession resulting in negative economy growth. The government must act now and take on the right decisions to be able to steer the economy from other crisis waiting to happen.

The Economic Recession: A significant Increase in Suicide Cases

In this past, there have been numerous shortfalls and setbacks by the US government that left American citizens weeping in vain. The 9/11 attacks on the world trade center that left over 3000 people dead along with the recent Ground Zero controversy were highly considered a national humiliation on the failure of the government to protect its citizens from terror attacks and promote respect to the victims of the tragedy. What people don’t realize is that there is something more humiliating than these previous events.

Since the beginning of the economic recession, people have been losing there jobs from left to right. The failure of every business entity created a domino effect that affected thousands of workers or employees leaving them without a source of income. This resulted in widespread panic and threatened the well-being of people. But recent studies showed that unemployment or joblessness may in fact affect the psychological aspect of every person. Aside from having a low morale and lesser productivity, joblessness may in increase the tendency of every person to commit suicide.

Suicidal tendencies are usually triggered by excessive drug usage, relationship problems or social struggles. But the economic recession has brought so many problems to individuals that they tend to believe that these problems will go on forever. Losing a job can really bring a huge burden especially to couples who already have children. Unemployed individuals tend to feel desperate and unease thinking about their bleak and uncertain future. Hopelessness will eventually force someone to do this immoral act of taking one’s life.

Though it hasn’t been scientifically proven yet, trends from several places that experienced the recent recession showed a dramatic increase in suicide cases. For example, in rural Elkhart County, Indiana, the unemployment rate at this year stood at 13.7 percent while the suicide rate was 40 percent more compared to previous non-recession years. The National Suicide Prevention Lifeline also received more suicide calls at this time of recession. In Jan. 2007, there were only about 13,423 calls. A year later, there were 39,467. In August, 2009, there were now about 57,625 calls from across the nation.

But perhaps the most humiliating thing about this is the failure of the government to prevent such instances. The lack of preventive steps and assistance paved the way for more human suffering felt by millions of Americans all across the nation. It is a sad fact that America’s own economy is the one responsible for the deaths of its people. Lack of trust and confidence in the government forced people to end their suffering by taking their own lives. It is wakeup call to all politicians, policymakers and lawmakers to do whatever they can to protect the welfare and well-being of its citizens.

The Moral Hazard Argument and its Implications to Unemployment

The first thing that comes to our mind when we hear about an economic recession is the collapse of numerous business and financial institutions. But perhaps the most significant and most destructive consequences are the massive layoffs and the rise of unemployment levels. With an underperforming economy, business institutions are forced to trim their workforce in order to reduce expenses and increase profit. Unknowing of the greater risks, these layoffs will in fact cause numerous unlikable and devastating consequences in the future.

It is such an eerie and uncomfortable feeling whenever you lost your job which was your only source of income. Most people utterly despise having come to a state of poverty or at least being unable to purchase what one needs or what one wants. Americans will definitely agree with me in mentioning that finding jobs today isn’t as easy as during pre-recession period. More people are losing their jobs or their source of income compared to people who gets accepted for work.

The U.S. Department of Labor stated that the U.S. unemployment rate is now at 9.5% and will continue increase if the government doesn’t find immediate solutions to create newer jobs. What worries most economists and individuals are the 479,000 people who recently lost their jobs and now are applying for unemployment benefits. In July, Republican senators tried to prevent the extension of jobless benefits for 2.5 million Americans. Republicans argue that $34 billion price tag for the bill isn’t reasonable enough as it will only increase the budget deficit.

Arizona Senator Jon Kyl voiced out a more philosophical approach indicating that unemployment insurance doesn’t create newer jobs and will only hinder people from seeking a new work. He emphasized that it is a moral hazard when unemployed people behave irresponsibly and become lazy when given jobless compensation. Several economists and advisers are worried that the U.S. might well become like Europe where unemployment benefits are permanently available and with the unemployment rate considerably higher at normal or recession-free times.

The moral hazard argument was basically tagged as inapplicable at recent times because of the many problems that the nation is facing. Today’s situation is certainly not normal and bad things really do happen. Raj Chetty, a Harvard economist, emphasized that in a recession, cutting jobless benefits to encourage them to look for jobs that do not basically do not exist is very unreasonable. Democrats will pursue the extension of jobless benefits in order to stop the bleeding and prevent jobless people from drowning more into poverty.

The Obama Administration: To Spend or Not to Spend?

The present events suggest that America is faltering and is losing so much money fast. The economy has become unstable and financial institutions are either holding their funds or are declaring bankruptcy. The American middle-class for example have taken the most impact as job scarcity is seen everywhere. Businesses and even the government departments themselves are massively laying-off workers. Finding a job today is just like finding a grain of rice in a sandy beach. And the results are definitely shocking as America’s future is put at stake.

There is a big decision that Pres. Obama has to make and that is if the government should spend more or lessen spending. There are certain points that we should consider. First is that job growth is stagnant and the unemployment rate is almost near 10%. The number of people who have remained unemployed for the last 6 months have almost reached 7 million and more are getting discouraged to seek for one. The foreclosures of banks have exceeded last year’s figures and mortgages are on a record low. Indeed, the Obama administration needs to take the right decision now to at least alleviate the problem.

Have you ever heard of the economic stimulus fund which amounted to $787 but now has ballooned to $862 billion? A lot of people actually opposed the idea of a stimulus indicating that it only made the budget deficit bigger. Pres. Obama’s economic recovery strategy is based on John Maynard Keynes strategy which calls for more government spending to battle recession. More spending by the government would mean more cash that can be used by both consumers and businesses in doing economic activities.

But the problem is people are already convinced that any further spending by the government will only hurt the nation. In a country where the national debt has already reached $13 trillion, citizens have already developed a mindset where more government spending will only add up to the budget deficit and will only put more burdens to its citizens. In fact, a study has showed that two-thirds of the respondents opposed the idea of a second stimulus package while 53% said the country is better off without the first stimulus.

It is indeed a tough and complicated task by Pres. Obama and his administration to make people believe that they are doing the right thing in helping America get out of the recession. Pres. Obama and his team of economic advisers are faced by the dilemma of balancing in order to avoid both overspending and under-spending. In order to gather that needed support, the government should first provide a rational and reasonable explanation on how will the government act to put the nation back to economic recovery. And if the government is really sincere in helping the nation, they should first cut and avoid projects and earmarks that are not really beneficial to the American people.

Today’s Recession May Damage the Future of America

There is indeed widespread panic among Americans who can be considered victims of the irresponsible acts of the Government which resulted into a global economic recession. The continuous increase in budget deficit and national debt has cut major government services and as a result, more people are unemployed or underemployed or underprivileged. The unlikable events that are happening may have caused a more destructive impact on the nation’s future.

Because of the rising trend in which individuals are deprived of work opportunities, families’ especially bigger ones are unable to support their children’s needs. Take for example the son’s or daughter’s of each parent which might not be able to go to school and get the proper education that is needed for a brighter future. Also take in mind those young children who might fell ill but cannot be brought to the hospital because of huge medical bills. Several evidences suggest that indeed the nation’s future is severely affected by this catastrophic event in America.

It has been projected that one in every four children will eventually experience poverty. Without job opportunities, teens aging from 16-24 will comprise the vast majority of persons who will more likely get no job at all. There is also a study which predicts child poverty to be on the rise in the next couple of years. In the study, it is noted that a child may have a higher chance of not finishing high school and may end up growing poor. Children may also end up being overweight because their parents are unable to provide them with healthy and nutritious foods.

Being poor may affect the basic elements of one’s survival such as health. Without sufficient money or savings, future adults may be deprived of proper healthcare and medical attention. More adults are prone to diseases and may die at a younger age. The morale and confidence will be lowered and basically the industry’s talents will be lessened. As an effect, families may also refrain from paying their taxes. The national budget will be lessened and so the cycle goes on.

There is indeed a relationship between the present events and what will happen in the future. What we are living today will greatly influence the future of our nation. Think of our future sons and daughters who might be suffering from starvation, poverty and lack of education. If we don’t act now, our nation will falter and the future might end in peril. The government should stop cutting the federal and civil workforce as this will only result in more unemployed individuals. The best practice is to implement programs that are accountable and at the same time reasonable which aim in helping more citizens get the essential benefits and eventually get back their jobs.