Great Recession in America the Term Paper

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This second package is expected to be more effective as it will focus on increased sales and spending, rather than tax deductions alone. Critics however argue that the benefits of this stimulus package will also be temporary and that the contracting economy might need a third stimulus, but it is yet unsure whether the Congress would be able to grant it (Moseley, 2009).

In spite of the efforts implemented by the American Congress, fact remains that the economic crisis was extremely severe and its threats could not have been removed. Paul Mason (2010) for instance agues that the crisis could not have been avoided as it was constructed on three decades of neoliberal policies, which eventually took their tool on individual companies such as Ford, the Wall Street giants, and finally the entire economy and the population.

One particular impact of the economic recession is the lack of liquidities which, ironically enough, only deepens the current economic problems. The occurrence of this liquidity crisis is extremely simple to explain -- the players in the economic community lost their trust and as such investments froze and the liquidities next to disappeared from the market.

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Stock market investors lost the trust in the companies and strived to sell their shares, rather than purchase new ones. Banks and other financial institutions refused to lend each other money as financial aid because they feared that their competitors would not be able to reimburse the bank loans. Also, in relationship with corporate or individual customers, banks increased their regulation procedures and refused loans as they did not trust the reimbursement capabilities of the credit solicitants. As a result, most of the liquidities are blocked.

Aside the liquidity crisis, other effects of the economic recession include:

The bankruptcy of economic agents and the necessity of cost reduction for the operating agents

The slowed down pace of innovations in all fields of economy, technology, education and so on the deepening of the socio-economic problem of unemployment

The incremental pressures on the state budgets

The reduction of competition within industries, which would subsequently lead to the creation of less customer value, materialized in poorer product and service quality, higher prices and so on (More Business, 2009).....

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