Why is The U.S. going into Recession?

I'm trying to do a report on who, what, where, why/how, is there a plan?... on Global or U.S. Recession.. & I need help please!!

Because you can only fool the people for so long, then reality catches up with you.

To answer your question, we really need to know the answer to a couple of other questions:
1) Where did it all start?
2) When did it all start?

For years, the current administration in Washington D.C. has been telling the American people how strong the economy is and how much stronger its getting. Every employed person in the United States jumped on that wagon train and exclaimed how strong the economy is in this country.

But, IMHO, that didn't make it so. The rich getting richer; the large corporations making record profits on the backs of the people; and the wholesale sale of our country and its assets to overseas investors do not make for a strong economy.

When the people work at jobs and make a decent living wage, they spend money to the betterment of themselves and their lives and their families lives. This in turn drives businesses to grow and prosper and employ more people. This is the mark of a strong and growing economy.

But the current administration would have us believe that most Americans are working. But how many executives have lost their jobs and found employment as a Walmart greeter, and how many "worker-bee" types are sitting at home watching the world go by because their unemployment ran out? or are competing with those executives for the limited greeter jobs? Did you know that unemployment figures only reflect people on unemployment? And that the unemployment rate in America drops as peoples' unemployment insurance runs out? Sure, they *might* be working, but not in a capacity that allows them to spend money.

Many of these people have borrowed money to support their lifestyles as they search for better jobs, that no longer exist because businesses have relocated overseas with cheaper workforces. Their credit cards are maxed out, paying fees for over-the-limit, missed payments, late payments, etc., all the while the credit card companies try to find other ways to charge for their services. People take out home equity loans to pay off credit cards, and other expenses, and then are unable to pay those. Its a viscious circle. Banks are foreclosing on homes in record numbers. And that ties up the banks' assets. Banks do not make money by holding onto property that they foreclosed on, but the housing market has slowed dramatically because the majority of people don't have the money to buy those properties, so the bank must sit on them and find other ways to charge their customers to make up the difference.

And if that's not bad enough, miraculously, since the current administration, who's "leader's" family is in the oil business, has gotten control of this country, there is a well publicized idea gaining momentum around the world, that the world is running out of oil and that's driving prices of basic necessities (shipping) and transportation through the roof. Maybe we are running out of oil. Maybe we're not. If we are, then the economy is likely to get worse before it gets better.

We live in a global economy, where the United States is just one of the major players. For years, American businesses have outsourced their "worker-bee" type jobs to people and businesses overseas, forcing thousands in this country to find (or not find) other jobs....turning booming metropolises into third world countries. And the trend continued, because its about how much money you can make for your shareholders, not about how many people you can employ. Today, we have started to see a backlash of these policies. Companies in other countries are beginning to realize that they do not need American companies to outsource business to them, but rather they can save money by eliminating the extra level of management in the United States. More jobs gone.

And if this isn't bad enough, we let illegal immigrants into our country and give them the few jobs that we had left, and pay them ten cents on the dollar for the work that could have been done by Americans. Then the government taxes the cr.a.p out of the people who cannot afford to have tax shelters, so we can pay for all of those illegal immigrants who arrived here without being able to find work. Based on the numbers tossed about by the government, a full 10% of our population can be considered to be illegal immigrants.

I honestly believe that we should have been in a recession starting a while ago, but we were fooling ourselves into believing we weren't, so it appeared to the general public that we weren't. But as I said at the top of this response, eventually reality catches up, and the fiction loses its support. The cost of living is skyrocketing, the number of people who, while they may be working, cannot support the lifestyle to which they became accustomed to in the 90s is skyrocketing, the fear that our government is part of the problem and therefore won't be able to do anything about the problem is skyrocketing.

I could write a book (or maybe I just did) on this subject. My response to your question of "Why is the U.S. going into a Recession?" is "Why are you surprised?"

i think because the base of america (the factory workers/ store workers etc.) dont have money to pay the other people working in other companies like electric, heat, and everything else and that also means that people cant afford to buy stuff so stocks are falling, prices are rising and no jobs are being created. And because no new jobs are opening that means that people with low education/limited talents wont have jobs and pay people working at higher positions cant do their job and before you know it no one has a job and we become a 3rd world country.

Immigration: This country let 9 million immigrants from Mexico into this country, and they don't contribute to the economy, then turn around and send the money back to Mexico, and this is why the peso is stronger than the dollar.

The stock market prices are declining quite a bit now. And usually declining stock market precedes an economic recession.

Many people have borrowed too much money and spent it all on homes, cars, things, and stuff. And now many of them can't pay that money back to the banks.

Banks are reporting huge losses and are restricting their lending to everyone now. And all the businesses and private individuals who depend on borrowing more and more money to pay for their expenses are in trouble as a result.

There is only so much money you can borrow, before your debts become too big and you can't borrow any more. And that's what's happening now in the US economy.

To get more information about it you can read financial websites such as:
http://money.cnn.com/
http://www.businessweek.com/
http://www.minyanville.com/
http://www.reuters.com/finance
http://www.msnbc.msn.com/id/3032072/?ta=y

It will likely be global and last into 2009 before things perk up. But to answer a really complicated question:
1) Home lenders loaned to many unqualified people (subprime).
2) Some of those were speculating by buying 2-5 properties at a shot in hopes of quick pfits through re-sale.
3) Rates ticked up and some of the mortgages went up with the rates.
4) Foreclosures happened
5) Builders stopped building as completed houses were unsold.
6) Every industry connected to housing slowed down
7) Banks who made or bought bad mortgages cut back lending taking fuel out of the economy. Many mortgages were sold overseas and have wounded those banks too.
8) Consumers get scared and stop buying, leading stores to order less, leading manufacturers around the world to make less.
9) And so on. It is one big domino effect around the planet.
10) The plan is to CUT RATES and put gas on the fire so we all get happy and start spending again.
11) Rate cuts take time to work and people take time to forget.
12) Your plan is to cut your expenses, build a savings fund, pay your debt down and on time, preserve your credit rating and wait for the storm to pass.
13) Or, if you are brave, seize opportunity, buy things cheap and wait for prices to come back, but be prepared to wait a year or more to get a great return.
Best of Luck

check out Lyndonlarouche.org he seems to be the only one who knows why it is happening and how to fix it.

Basically its with all the debt (credit card, mortages and others) that really isn't tangible. when people charge for money they don't have there is no money there to pay that debt.

Example. Let's look at the individual. If I have $10,000 of actual money in the bank but have 30,000 of debt I have $20,000 of money that i just made up. I don't have it and its just imaginary. Now imagine millions of people that are that far in debt. There isn;t enough actual printed money in teh world to cover up that amount of debt! that drives up inflation and caused the value of the dollar to drop quickly (which it has been doing) The whole bubble of this debt is going to burst and we are going to go in to a DEpression not a recession.

There are other reasons too like hedge funds and stuff but it basically comes down to the fact that people are buying selling and charging things with money that doesn't exist.

going back to that example, lets say that $20,000 of debt was for a new car. Now that car has been paid for with money that doesn't exist because it hasn't been paid back. so technically that car was never paid for and thus the car maker is out $20,000. the credit card companies are taking on all of this debt that people accumulate and what happens when the credit card company runs out of money and tries to call in the debt millions of Americans owe?

Pop! the whole thing falls down.

In my opinion:

There have been many events which have contributed to our current economic situation.
The beginning, I feel, came from the hugely overinflated positive markets of the mid-1990s. The administration at this time opened up free trade with China, a communist state. Their poorly performing dollar and cheap labor (because of a lack of environmental protections and good working conditions) allowed us to import their goods very cheaply. So cheaply in fact that we can import steel from China (shipping it all the way here) for less than we can produce it on our own soil. As our trade deficit with China grew their dollar should have been worth more. As it was, it didn't. Being a communist state they were able to keep their dollar deflated to keep their goods cheap as ever to America. This has resulted in the $200 billion + trade deficit we've held with China for years.
Unfortunately, this all happened at the same time as the dot-com boom. These companies made incredibly quick start-up profits that spurred the stock market on. Cheap goods and quick huge revenues looked good.
This caused real estate to rise drastically. (People were making big money on investments, goods were cheap, they had money to spend.)
As it always does, the market started to correct itself. The recession in 2001, in my eyes, was this correction. The level to which the stock market and real estate fell wasn't out of line. These fell to where they should've been. But it was a long drop from the pumped up places they were.
9/11 just made things worse. Fear has never been good on the open marketplace and the post 9/11 economy is an excellent indication of this. Insurance companies took losses and raised their rates. The ones that didn't feared that they could in the future, so they raised theirs too. There were big stock sell-offs in the face of uncertainty concerning national security and this caused more people to worry and they sold off too.
So then we get a war...Big government spending has historically been great for the government, but not this time. Because we're spending our way right into a massive national debt.
And we still have this problem of free trade on an uneven playing field. Other countries with no labor laws, no health care, no benefits, they all sell us goods incredibly cheap. And of course, since they produce goods cheaply we have to get in on that. So we take our labor and outsource it. That's a great way to increase our profits. But these increased profits don't end up meaning much seeing how we lose jobs. Unemployed people can't afford to buy much no matter how cheap, you know?
Basically, our economy needs to adjust to the changed marketplace. America is no longer going to be a manufacturing nation. If we can recognize our place as a service nation and change our business models accordingly, or enact tariffs that make trading with other countries less proifitable, then we can become as great an economic power as we once were.

The US encouraged and lent too much money over the last 5 years to people to buy houses that should never have been lent the money. Everything became highly price inflated.

Now people dont have enough money to spend to support the economy, so they have potential recession.

Well there are plenty good viewpoints of why the US is having a recession in this article here:

http://news.bbc.co.uk/2/hi/business/7181922.stm

But be sure to understand it and see if it agrees with your opinion as well as question his opinion to get a good mark for your assignment. Good luck!

the economy is doing poorly

people spending less b/c they don't have value in their houses to borrow from anymore. banks lending less for everything because they have lost so much money on this housing mess. people cant spend more b/c they're completely tapped. the gov't can't help b/c we have such a huge deficit from the war. foreigners not willing to lend up more b/c we owe them so much already. how's that? pretty grim. tba

Because economies based on capitalism go through a cycle of prosperity, recession, depression, and recovery then back to prosperity.

i would love to have an explanation too on this.
i think it might be the war..

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