The Collapse

Executive Summary

The current U.S. economy is the topic of this report. There is a brief overview of the economy in the last century. A low point in that history was The Great Depression in 1929. Currently our Government has been desperately trying not to repeat that history. Even with the Great Depression, there is no argument against the U.S. being the strongest economy over the last 100 years. There were other minor crises’ along the way, for example, an oil price driven recession in the late 70’s with high unemployment and inflation. By 1983 the economy was back on track and America’s economy boomed for the next few decades. A little competition with Russia turned out to be great for our economy (but not so great for Russia). The late 80’s and 90’s was a period of great prosperity. A global economy has emerged during the last half of the twentieth century leaving America with a service based economy, as we lost our industrial jobs to countries with low wages we could not compete with.

Within the last five years a perfect storm of events has put us into another recession. It may have started in 2003, after catastrophes like Hurricane Katrina, Enron, and the September 11th terrorist attacks. To try and keep the economy strong the Federal Reserve lowered interest rates, but some say they kept these rates too low for too long and could have been a crucial turning point. The Federal Reserve is a government agency with a number of functions; the two most important are keeping unemployment and inflation rates low. Former Chairman of the Federal Reserve, Alan Greenspan received much of the credit for our booming economy from the late 80’s until the turn of the century. He may be responsible for starting the snowball rolling down the hill that would turn into an avalanche of economic problems though. From the late 90’s to 2003 he made 13 straight interest rate cuts that lowered the Fed funds rate to a meager 1%.

A 1% Fed funds rate made many bank managers thirst...