Federal Reserve Chair Ben Bernanke At the helm of the country's leading monetary policy-making body during the financial crisis, Bernanke was the face of quantitative easing. This policy involved reducing interest rates and injecting more money into the economy to encourage banks to lend and consumers to spend.
In September 2008, Congress approved the “Bailout Bill,” which provided $700 billion to add emergency liquidity to the markets. Through the Troubled Asset Relief Program (TARP) passed in October 2008, the U.S. Treasury added billions more to stabilize financial markets—including buying equity in banks.
The recession lasted 18 months and was officially over by June 2009. However, the effects on the overall economy were felt for much longer. The unemployment rate did not return to pre-recession levels until 2014, and it took until 2016 for median household incomes to recover.
In 2008, at the peak point of the global financial crisis, the legendary investor invested $5 billion in Goldman Sachs to strengthen the firm's capitalisation and liquidy in turbulent times. The then decision of Buffett has generated a return of roughly $3.1 billion for him.
1 By October 2008, Congress approved a $700 billion bank bailout, now known as the Troubled Asset Relief Program. 2 By February 2009, Obama proposed the $787 billion economic stimulus package, which helped avert a global depression. 3 Here is an overview of the significant moments of the Great Recession of 2008.
1991–1992: The early 1990s recession mainly resulted from Australia's efforts to address excess domestic demand, curb speculative behaviour in commercial property markets and reduce inflation.
2008: In response to the housing bubble and subprime mortgage crisis, the S&P 500 lost nearly half its value and took two years to recover. 2020: As COVID-19 spread globally in February 2020, the market fell by over 30% in a little over a month.
What are some examples of businesses that thrive in recession? Due to the elasticity of demand, recession-proof industries are usually in essential services, like health care, senior services, grocery stores, and maintenance, such as plumbing and electrical.
The best performing assets were hedge funds, US treasuries and gold. The worst performing assets were stocks, junk bonds and listed property investments.
Contrary to investor expectations, several growth stocks including Apple Inc. (NASDAQ:AAPL), Amazon.com Inc (NASDAQ:AMZN), and Netflix Inc. (NASDAQ:NFLX) grew during the 2008 recession, so investors don't have to ignore growth stocks to be conservative.
To wrap it up, though the world might witness financial problems in the coming years, probably because the recession is part and parcel of an economic cycle, the great financial crisis of 2008 was a phenomenon in itself and is most likely not going to occur again.
What could the government have done? The Bush administration could have reduced the outsized fiscal deficits that spurred foreign borrowing, and more generally could have acted to slow an overheated economy. The Federal Reserve could have raised lending rates to decelerate the credit boom.
In a best-case scenario, the U.S. will likely see a 'soft landing' with low/slow growth across 2023 before picking up in 2024. However, a downside scenario is a real possibility and could see the U.S. enter a prolonged recession lasting well into 2024, as is currently forecast for the UK and Germany.
The Great Depression lasted from 1929 to 1939 and was the worst economic downturn in history.
Great Depression
The Roaring Twenties came to an abrupt halt, beginning with the Stock Market Crash of 1929, setting off the longest and deepest economic downturn in history. Dependence on the gold standard, droughts in the southeastern states, and increased tariffs pushed unemployment to a peak of 24.9% in 1933.
While gold prices may rise through a coming recession, there are a few different reasons why gold makes a good choice for investors during periods of economic downturn. For one, it's a great way to diversify.
Business titans such as William Boeing and Walter Chrysler actually grew their fortunes during the Great Depression.
Higher interest rates that often coincide with the early stages of a recession provide an advantage to savers, while lower interest rates moving out of a recession can benefit homebuyers. Investors may be able to find bargains on assets that have decreased in price during a recession.
Products that are essential for daily life, such as food, cleaning supplies, and personal hygiene products, may be in high demand during a recession as consumers try to cut costs by limiting non-essential purchases.
So, not only do banks typically see a rise in loan losses in a recession, but loan portfolios that generate interest income often shrink -- or at least stop growing -- as well. The good news is that some banks are better positioned than others to weather the effects of a recession.
The 2008 Financial Crisis Cost Americans $70,000 on Average.
Investing in broad funds can help reduce recession risk through diversification. Bonds and dividend stocks can provide income to cushion investors against downturns.
Although it's possible, things would have to deteriorate very quickly in the economy, and the jobs market specifically, for a downturn to start this year. “We're running out of time for a 2023 recession,” Justin Wolfers, an economics professor at the University of Michigan, told CNN.