The terrorist attacks on 9/11 took a toll on U.S. industries. The stock market plummeted in the days following the attacks. Airlines struggled to avoid bankruptcy as Americans, leery of airline travel, cancelled their travel plans.
The economy recovered quickly, though. Low interest rates and lax lending rules made it easy for people to buy homes. Many people bought larger, more expensive houses than they could really afford. Home builders built more houses than they could sell. House prices rose quickly. Growth slowed and housing prices dropped. It was the beginning of the Great Recession (2008 to , the worst economic downturn since the stock market crash of 1929 and the Great Depression.
- Many Americans lost their jobs because companies could no longer afford to keep them. At the same time, Americans carried more credit card debt and other debt than ever before. They couldn’t afford to pay the mortgages on their homes.
- If someone couldn’t pay his mortgage, the banks could foreclose on the home – or take it back from the owner. In 2007, almost 1.3 million people lost their homes. Banks tried to resell the homes, but often had to lower the price or let the home sit on the market for many months.
- Home values in many parts of the country had risen quickly during the early part of the 21st During the recession, home values went down. People often owed more on their homes than they were worth.
- As people lost confidence in the economy, they stopped spending. The value of the stock market went down. Many people lost their investments during this time. Older people who were retired or almost retired were particularly hard hit.
- Banks lost money and went bankrupt. The Federal Government bailed out many banks and also helped U.S. carmakers. Obama approved money to build infrastructures, such as roads and bridges. This money meant new jobs.
- The recession spread to Europe and then to many parts of the world.
- Although Obama said that the markets were stabilized and the recession was over in 2010, many people were still rebuilding their lives several years later.
- Bankrupt: when a company or individual is unable to pay its bills
- Foreclose: when a bank takes back property, such as a home, because the owner doesn’t pay the loan payments
- Infrastructure: the underlying elements of a society, such as roads, bridges, and pipes
Questions and Answers
Question: How can we prevent another recession?
Answer: The economy tends to grow and shrink in cycles that can’t always be predicted or prevented. Government and industries can help by keeping a healthy balance of regulation and not taking foolish risks. Individuals can be prepared for hard times by avoiding debt and living within their means.
Visit The State of Working America to read more about the Great Recession.
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Tobin, Declan. (2019). Facts for Kids about the Great Recession 2007-2009. American History for Kids. Retrieved from https://www.americanhistoryforkids.com/great-recession-2007-2009/