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Ron Paul Predicts the Great Recession: Austrian School of Economics

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Published on Jun 3, 2012

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1988

The 2008--2012 global recession, sometimes referred to as the late-2000s recession, Great Recession, the Lesser Depression, or the Long Recession, is a marked global economic decline that began in December 2007 and took a particularly sharp downward turn in September 2008. The global recession affected the entire world economy, with higher detriment in some countries than others. It is a major global recession characterized by various systemic imbalances and was sparked by the outbreak of the 2007--2012 global financial crisis.

There are two senses of the word "recession": a less precise sense, referring broadly to "a period of reduced economic activity", and the academic sense used most often in economics, which is defined operationally, referring specifically to the contraction phase of a business cycle, with two or more consecutive quarters of negative GDP growth. If one analyses the event using the economics-academic definition of the word, the recession ended in the U.S. in June or July 2009. However, in the broader, lay sense of the word, many people use the term to refer to the ongoing hardship (in the same way that the term "Great Depression" is also popularly used). In the U.S., for example, persistent high unemployment remains, along with low consumer confidence, the continuing decline in home values and increase in foreclosures and personal bankruptcies, an escalating federal debt crisis, inflation, and rising petroleum and food prices. In fact, a 2011 poll found that more than half of all Americans think the U.S. is still in recession or even depression, despite official data that shows a historically modest recovery.

Large corporations and wealthy businesspeople were minimally affected by the recession, and were the first to recover. Shortly after the economic recovery began, many Fortune 500 corporations reported record profits and many billionaires saw their net worths hit new highs. The 2011 edition of the annual U.S. dollar billionaires ranking compiled by Forbes Magazine broke new records, both in terms of the number of billionaires (1210) and their total wealth (US $4.5 trillion.) The Sunday Times Rich List for 2012 showed that the UK's wealthiest were richer than they had ever been, with a combined fortune of £414 billion.

According to the U.S. National Bureau of Economic Research (the official arbiter of U.S. recessions) the recession began in December 2007. US mortgage-backed securities, which had risks that were hard to assess, were marketed around the world. A more broad based credit boom fed a global speculative bubble in real estate and equities, which served to reinforce the risky lending practices. The precarious financial situation was made more difficult by a sharp increase in oil and food prices. The emergence of sub-prime loan losses in 2007 began the crisis and exposed other risky loans and over-inflated asset prices. With loan losses mounting and the fall of Lehman Brothers on September 15, 2008, a major panic broke out on the inter-bank loan market. As share and housing prices declined, many large and well established investment and commercial banks in the United States and Europe suffered huge losses and even faced bankruptcy, resulting in massive public financial assistance.

A global recession has resulted in a sharp drop in international trade, rising unemployment and slumping commodity prices. In December 2008, the National Bureau of Economic Research (NBER) declared that the United States had been in recession since December 2007. Several economists have predicted that recovery may not appear until 2011 and that the recession will be the worst since the Great Depression of the 1930s. Paul Krugman, who won the Nobel Memorial Prize in Economics, once commented on this as seemingly the beginning of "a second Great Depression." The conditions leading up to the crisis, characterized by an exorbitant rise in asset prices and associated boom in economic demand, are considered a result of the extended period of easily available credit and inadequate regulation and oversight.

http://en.wikipedia.org/wiki/Great_re...

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