Current state of the US economy Essay Example | Topics and Well Written Essays - 500 words

Current state of the US economy - Essay Example The world always closely observes the political and economical spheres of the US. Undoubtedly, the waves in the US economy are reflected throughout the world economy. But the global recession which marked its beginning in December 2007 was a huge setback to their undisputed leadership in the world economy. US economy was deplorably affected by the global recession of 2008. The subprime mortgage crisis was the sole cause of this recession. A huge fall in housing related assets resulted in a global financial crisis. Oil and food prices went up like anything. This eventually went to the collapse of a number of financial enterprises like Lehman Brothers, Bear Stearns, Freddie Mac, Fannie Mae and AIG etc. Automobile industry was also badly struck. It was a period of scrambled economic activity and negative expansion in GDP. The aftermaths of the late 2000s recession brought about overwhelming downfall in almost all phases of the economy. Contraction of GDP began in the third quarter of 2008 and was contracting rapidly by early 2009. Capital investment declined to the lowest rate in 50 years. As a result, the US had to face political instability as well. Decline in consumer credit, real estate bubbles, personal bankruptcies etc put the US economy into turmoil during this period. The GDP decline was about 5.1%. The US government announced a $700 billion bank bailout and $787 billion fiscal stimulus package to tackle the situation. The US was also struck by the draining of capital investment to developing countries like India and China which were not deeply affected by this recession. Government measures could not yield many results initially, but the economy started to regain its stability gradually, though in a slow pace. A poll by Reuters says that more than 50% of the Americans think that US is still in recession (Reuters polls). But according to official data of Bureau of Labour Statistics, a modest recovery is taking