Great Recession

The Great Recession, or simply the Recession, is an umbrella term that has recently been adopted to describe the multiple economic crises plaguing the United States: the late-2000s recession, the anemic economic growth that has followed in its wake, the ongoing financial crisis, the government debt crisis, and the continuing decline of home prices.
History of the Term
Great Recession has its origins as a pun on Great Depression, the name of the economic depression of the 1930s. The term was periodically used to refer to recessions in the post-World War II era. Only more recently did the term gain acceptance in media and academia as exclusively referring to the late-2000s recession and the anemic economic growth that has followed in its wake, as well as a general term for the ongoing financial crisis. In 2010, the Associated Press added the term to its style guide as the official title for the "late-2000s recession." There is some resistance to the term, especially from those who see the Great Recession as a structural change in the global economy, and therefore does not follow the typical behaviors expected of a recession.
New Normal
As the Great Recession technically ended, the seemingly permanent state of economic depression was referred to by some as the "New Normal" as massive long-term unemployment, weakened labor unions,, falling home prices, and foreclosures continued despite economic growth resuming at a low rate. Pessimists predict that the stagnant economy might continue for a decade and mirror . American economic experts, including the Board of Governors of the Federal Reserve, are aware of the Japanese experience, but fear that political demands for economic austerity may prevent application of economic remedies which might avoid prolonged economic stagnation. According to Paul Volcker chairman of the President's Economic Recovery Advisory Board speaking in November, 2010, the prospect for the near future is for only gradual improvement in the economy.
View and actions by the Federal Reserve
The Federal Open Market Committee in a statement released November 3, 2010 made the following statement regarding the state of the economy of the United States: Information received since the Federal Open Market Committee met in September confirms that the pace of recovery in output and employment continues to be slow. Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak. Employers remain reluctant to add to payrolls. Housing starts continue to be depressed. Longer-term inflation expectations have remained stable, but measures of underlying inflation have trended lower in recent quarters. This assessment was accompanied by a decision to purchase $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month. This purchase is part of the Fed's asset-purchase program and has the effect of reducing demand for long-term bonds thus lowering long-term interest rates and expanding the money supply. The purchases will be made on the open market from securities dealers; direct purchase from the U.S. Treasury is prohibited. The action, part of what is sometimes called "QE2", quantitative easing round two, was criticized by emerging countries as low interest rates in the United States can result in excessive capital inflows in search of high yields in other nations which may produce speculative bubbles.
Depression-era decline in home values
In November 2010, it was reported by real estate firm Zillow that US home values fell 4.3% in the third quarter of 2010 from the same period in 2009, marking the seventeenth consecutive quarterly decline. With home values 25% below their 2006 peak, the length and severity of the current downturn is approaching Great Depression declines, when home values fell 25.9 percent in five years, the report said. The Zillow Home Value Index, down 1.2% from the second quarter, reached $179,900. Of single-family homeowners with mortgages, 23.2% were underwater, the highest since Zillow began tracking negative equity in 2009. The Home Value Index at the national level is calculated using a weighted average of the median home value for each county and includes data from 440 metropolitan statistical areas.
Public debt crisis
The U.S. government has been described as the world's biggest, most indebted consumer, borrowing from lenders all over the world to finance about 43 percent of its spending in 2011, the government's biggest borrowing binge since World War II. Even a hint that the United States might default on its debt, similar to what has happened in Europe, would produce financial mayhem that some say would dwarf the financial meltdown that began in 2007. The mushrooming national debt was more than $14 trillion as of March 2011, and is projected to soon eclipse the total size of the U.S. economy. Yet because interest rates are remarkably low, interest payments on the national debt will cost taxpayers about $210 billion this year, which is less than the cost of interest in every year between 1995 and 2000. Interest payments will account for just 5.4 percent of federal spending in 2011, compared to 12.5 percent in 2000. But Interest rates are nearly certain to rise from their historic lows as the global economy recovers and demand for capital picks up. The White House predicts that by 2015, interest payments on the national debt will balloon to nearly $500 billion, or nearly 12 percent of all spending. After 2015, America's debt, on its current course, would begin to consume so much cash that it would suffocate the economy. Bloomberg identified some developments that could push the public debt crisis into a full-blown financial crisis: Investors begin to shun U.S. government securities, the economy falters, inflation ends up worse than expected, the cost of insuring against a U.S. default goes up, or the United States is subject to a credit rating downgrade.

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