Asian Journal- The Filipino-American Community Newspaper

Even the strongest feel the cracks in the face of an earthquake. This is evident in the current financial crunch that hit the world’s richest economy, the United States. The economic recession in the United States is now the topic on everyone’s mind. Economically speaking, recession is part of the ebb and flow of our life. But in 2008, the world witnessed the dramatic drop of the United States’ stock markets, the collapse of large financial institutions, the bailout of banks by national governments and downturns in stock markets around the world and how the then-president George Bush struggled to resolve the dawning economic regression.

It is considered by many economists to be the worst financial crisis since the Great Depression of the 1930s. It contributed to the failure of key businesses, decline in consumer wealth estimated in the trillions of US dollars, substantial financial commitments incurred by governments, and a significant decline in economic activity all over the world since every country across the globe has this so-called "dependency" in the US. Economies worldwide slowed during this period as credit tightened and international trade declined.

Analysts concluded that the US recession had its origins in the country’s subprime mortgage market. Developments in this market resulted in significant and unexpected disruptions to real activity and financial conditions in its people and many economies. This is what the current situation of the sagging US economy, where many subprime mortgages were sold to people who couldn’t pay back.

Emblematic of the downturn until now has been the parades of houses seized in foreclosure all across the country. If the mortgage industry has been properly synchronized, these kind of absurd mortgages could never have been lent. After years of living happily beyond their means, Americans are finally facing financial reality. Job growth is slowing and wage gains have been anemic because of this mortgage fiasco. With US economic growth hit by the downturn in the housing market, and the knock-on credit crisis, recent data has shown a sharp fall in retail spending.

Spending on home construction and items such as furniture and stoves accounted for about 15 percent of gross domestic product in the second quarter, according to West Chester, Pennsylvania-based Moody’s Analytics. Real estate also can influence consumer spending indirectly. When values soared in the mid-2000s, people used the boost in equity to pay for cars and vacations. After prices fell, homeowners lost that cushion and curbed spending. These fact only proved that a combination of inflation, over-spending, and consumer debt could start a chain reaction.

Picture this scenario…52 percent of Americans have suffered major economic loss, 35 percent have seen their personal investments halved, 27 percent have had pay or benefits cut and 14 percent have lost their jobs because of the current recession. Many of the once spoiled Americans are now stepping back and contemplating on how they spend their priced bucks.