Recession, steadily rising gas prices.....?

Question

What made us go into this recession? Those house loans that were given to people who could never afford them to begin with? When will it end? Are these outrageous gas prices part of the recession or is it because of the war? What is going on in the world!?! It is scary. I want to buy a Prius to save on gas.

Answer 1

Many different things...

- subprime housing collapse

- the shrinking value of the dollar

- our governments national debt

- lowered interest rates on Treausry Bills

- we don't produce as many tangible goods to sell abroad, insted we import (buy foreign goods) more, than we export (sell our goods to other countries)

- low productivity from obeseity and poor health care which has some correlation to the fact that large parts of this nation are uninsured or underinsured

- our government spending hundreds of billions of dollars on war in Iraq that could have been used to build public transit, invest in better technology in automobiles and power utilities, retrain unemployed American industrial/manufacturing employees, better educating young adults in math and science...

- and the price of gasoline.

Answer 2

This is a pretty complicated question to answer.  The recession is due to a number of factors, and the simplest answer is that our economy is not humming along as well as it should.  Due to the rising costs of everything (food, gas, etc...) people are not able to purchase goods and services offered by US companies.  Additionally, investment in the US by foreign countries as not as strong as it once was.  The housing crisis contributes to all of this, but this isn't as widespread as people may think.  Currently only 1% of all US homeowners are in foreclosure.  This is a big number, but it's not hugein the general scheme of things.

Gas prices are driven by supply and demand.  Demand for crude oil is higher than it ever has been due mainly to the high growth rates of India and China economies.  Supply of crude oil is also much lower partially due to the war, but also because oil exploration is much more costly, oil processing facilities are at max capacity, etc...

Just realize that things do go in cycles, and don't loose faith.  Buying a fuel sensible car always make sense from both an environmental and economical stand-point.  There is no indication when this will end.  Recessions can last a couple months, years, decades.  Hard to estimate.

Answer 3

well this is a complex subject....

The recession that people speak of has two main reasons for occurring.

1)  Job loss in the US... Employment numbers have been going down for a few months now pointing to a recession.  Not to mention they don't appear to be headed upward.

2)  The credit crunch in America.  Basically at the turn of the century interest rates were lowered to the lowest level in years.  Everyone was encouraged to buy property with various tax incentives.  Mortgage lenders assumed they'd be able to loan out extravagent amounts of money and that it would be fine because housing prices would continue to rise.  There plan would have worked except that over the past year or so housing prices on average have been decreasing leading to what may become a large amount of foreclosures which when happening all at once will really hurt the housing and lending markets.  

So because of this your local credit company will not be able to lend out as much money as they could before so they could hold on to cash to pay off the cost of the foreclosures while hopefully not going bankrupt or having to get bailed out by the fed.  This shortage of credit decreases the amount of money circulating the economy leading to a recession.

It will end when housing prices return to realistic levels jobs start to increase again and the banks have overcome the upcoming punishment they're about to take.

The outrageous gas prices contribute to inflation lowering the amount of spending cash the average american has making the recession worse.  

The amount of money we borrow from the war deflates the value of the american dollar.  Which over time will contribute to inflation of the american dollar as well as effecting everyday traveling consumers right now.

Buying a prius is your own decision I think it's kind of an ugly car but it does get good gas mileage ;).