Read the opinion piece (link https://ari.aynrand.org/free-markets-didnt-create-the-great-recession/) where the author indicates that the Great Recession of 2009 was not caused by the Free Market, but was instead caused by US Government policies.
· Locate two JOURNAL articles which discuss this topic further. You need to focus on the Abstract, Introduction, Results, and Conclusion
· Summarize these journal articles. Use your own words, no copy-and-paste. Your work should contain at least 310 words and at least two academically reviewed journal articles.
·
Following are important for post and replies:
· Cite your source!
· The initial post and peer replies must be different! In other words, do not reuse your
initial post for your peer replies.
· Provide concrete examples, perhaps from your own experience or cited from the reading
· Identify consequences or implications
· Challenge something that has been posted – perhaps by playing devil’s advocate in a
professional way
· Pose a related question or issue
· Suggest a different perspective or interpretation
· Pull in related information from other sources with proper citation – books, articles,
websites, courses, etc.
· Please note that simply affirming the viewpoints of others does not contribute to online
discussion so thus is not counted as reply
Replies
Reply to following posts with at least 160 words and at least 1 cited reference, do not say, good job, way to go, etc. Your reply should reflect an understanding of the post to be replied and should be relevant with the post.
Great Recession Post 1:
The great recession refers to a period where the market observed a general decline in the global economies. Although the recession started in the late 2000s, it stretched till 2009 when the international monetary fund regarded it as a great recession affecting country economies globally. It was the most severe economic global economic crisis since the time of the great depression. Although several authors have argued that the great recession was caused by the free market, several authors have differed with the opinion and concluded that a great recession was caused by the U.S government policies. This work seeks to give a summary of two article journals that have supported the argument that the great recession was caused by the U.S government policies. The two articles are “What Caused the Great Recession” and “In the Search of the Reasons for “The Great Recession”: Time for a Change in Policies?”
According to the articles, the great recession was caused by the US government because its main cause was the failure of the Federal Reserve to tame the rise of toxic mortgages in the country (Khandker, 2011). The government’s failure to tame the mortgage tide in the country exposed the economy to vulnerabilities that originated in various sectors such as the financial system triggering a burst in the housing bubble between 2005 and 2006. The housing bubble caused a deep fall in the housing prices and that made many homeowners default their mortgages (Homburg, 2015). Consequently, the mortgage-backed securities value possessed by investment banks reduced between 2007 and 2008. Many of those investment banks collapsed while others were bailed out. Having a combination of commercial banks that are unable to provide funding to businesses and homeowners that were paying debts instead of borrowing and spending led to the great recession that started formally in the US in December 2007 until 2009 June. The authors conclude that the Federal Reserve’s failure to regulate the mortgage industry affected the functioning of the money markets in the country which escalated to other countries.
Great Recession Post 2:
The great recession is a downturn or what we may call an economic decline that was experienced in the world markets. In the United States, the Great Recession happened between 2007 and 2009, and this decline was the most severe recession of the economy that ever occurred in the United States. This economic decline had a lot of impact on the economy. Mentioning just but a few, it led to high levels of unemployment; it also resulted in lower incomes and also wages. Although there is no concrete agreement on what led to this Great recession, explanations have been made which have over and again been argued or supported.
In Ayn Rand’s article on this issue, he starts by pointing out a myth which he thinks many people believe. He says that it is a myth to say that the Great Recession was caused by policies of free markets. In his argument, Ayn explains how the economic recession could not have happened without the government being involved most notably by providing subsidies or by coming up with policies to control the financial markets. He explains why free markets should not be blamed. He says that free markets, especially in finance, never existed as the industry faced a lot of regulations and thus any chance of blaming them. Government housing policy contributed so much in the recession as it (government) tried to increase the number of house owners. The housing policy led to money concentration in the housing industry as well as contributing to the decrement in the standards of lending, and this impacted on the housing bubble. Lower standards experienced in the housing market were rapidly spread to other markets within the economy. Ayn summarizes by pointing out that, if the government would not have been involved in encouraging the indiscreet lending that explains the crisis, then it is likely it would not have occurred.
In a different article by Vogli and Awusu, they explain so much on how rules and regulations at either the national or even the global level can be used to prevent any financial problem in an economy. In addition, the same rules and regulations can contribute to declining of the same economy. They link their explanation to the great recession, which they argue that the government played a major role in the recession. According to these two, governments can always realize a healthy and regime structure if they bring in place policies which are not discriminative in any way. All markets in the economy should be considered fairly.
A market model of the United States economy is built to try and find out what really could have transpired, leading to the great recession. According to this market model, if the house prices by any chance change, then it can be associated with close to half of the boom-bust of the expenditures (Kaplan et al. 2016). After the analysis of the market model, it is concluded that a debt forgiveness policy, if put in place at the beginning of the housing crisis, would help even though it would have an insignificant effect on the decline of the house prices.
Based on the three articles explaining how the great recession came to be, it is still hard to put the whole weight on one side. Nevertheless, the government, in one way or the other carries heavier weight because the financial industry in entirely controlled by the government, and thus, it takes full responsibility.