The 2008 – 2009 financial crisis is currently affecting the nation’s economic status and millions of Americans. Financial crisis is the burning issue though currently, several ways of solving this problem have been implemented. This research paper would be deeply focusing on how this issue would be solved to spur economic growth, increase investment by the private sectors, increase GDP, increase the level of employment, and many more.
For the country to solve this problem and control it from recurring, market stability should be maintained by creating convenient lines of credit. Through these credit lines the nation would be assured of continuous flow of money which will in turn speed up the economic growth and commerce of assets (Anderson, 234). This would solve the major problem experienced by financial institutions of holding assets which were left as security for loans. It becomes hard for the institution to transform these assets into cash leaving the lending institutions dry. If well managed the lending institutions would always have some cash to lend out hence increasing their investments.
Credit should be made more expensive to avoid it becoming so easy for everyone to make many investments which are based on speculations. Expensive credit would not be afforded by everyone but only a small percentage. Cheap credits make the majority in the population to have much money in their possession (Krugman, 436). Due to influence, the majority purchase the same thing which increases demand and finally inflation. As a result of the troubled homeowners, the government should put all efforts to negotiate with banks incases of failing mortgages to ensure they don’t close down the houses. The government should provide an affordable way through which homeowners would make payments and enjoy decreased interest rate and extended term if they manage successfully. If the government may decide to compensate the banks for the lost funds through the decreased interest rates, every family would be maintained in its house hence improving the consumer savings as well as boosting the economic growth (Krugman 460). Working together with the government, banks, and homeowners can reduce cases of foreclosures within the nation. The act of keeping families in their own homes can save the economy much more compared with the cost of mortgage negotiations.
Unemployment would always make the financial crisis worse. Both the private and public sectors should provide job growth. With continual losses of jobs, the more the country would take to recover from the financial crisis (Dunaway, 35). The salary of the working people offers support beyond their families such as to retailers, grocery businesses and many more. This salary as well promotes consumer spending a great deal which is a very positive move on the economy. It may be hard for the private sectors to create all the jobs which may be required; hence the government should initiate a massive program of public works. The most appropriate way is to provide money to the state government to be distributed in infrastructure projects. When people start working and getting some payments, they will be in a position to pay for their mortgage, and pay all forms of taxes which they are responsible for.
The current financial crisis can be solved by the government by keeping the home owners in their premises and creating employment (Anderson, 362). As citizens start earning through their employment, they would also get involved in several investments and commercial activities. This step will increase the total income generated in each month to several individuals and finally lead to increased gross domestic product of the nation.
Anderson D. R. Statistics for Business and Economics. Cengage Learning EMEA, 2007.
Dunaway S. Global Imbalances and the Financial Crisis, ISBN0876094280, 9780876094280, Council on Foreign Relations, 2009.
Krugman R. and Maurice O. International Economics: Theory and Policy ISBN0321553985, 9780321553980. Pearson Education, 2008.