A Crashing Economy

2008-2010

Crash: How it happened

How people changed

How people

were aff

ected

By: Henry Rech

How people were affected

The economy crashed because of financial instruments called securitization where banks would pool together and sell loans.

When house prices fell, the assets banking there loans lost value caused banks to fail.Results of crisis: Banks stopped lending money to business, business started laying off workers, unemployment increased and people started buying less things.

The value of people’s houses went down and that affected people terribly because they would have to sell there house even if they did not want to.

POWER WORDS!

Pool: the combined interests or funds.Securitization: pooling financial investments to reduce risk

Crash: How it happened

How people were affected

How people changed

How People ChangedPeople had to start cutting back on buying toys.55% of all adults say since the

economic crash 30 months ago they have suffered unemployment, a cut in pay, a reduction in hours or have been forced to work only part time, and make less money. A new frugality occurred. People began using their credit cards less and spending less for Christmas presents. People began having a diminished set of expectations about their retirement and even their children’s futures. A concern is that it will take several years or more for families’ finances and house values to recover. Since for most people their house is their most substantial asset, this is especially troubling.

Crash: How it happenedHow people were affected

How people changed

POWER WORDS!Frugality: Carefully saving or sparing; not wasteful.Unemployment: The state of being out of work, especially involuntarily.

How people were affectedMany people were affected by the crash because they lost there jobs. This meant that they had less disposable income to spend on necessities and also luxuries. In a recent poll 62% of the people questioned said they had to reduce their spending since the start of the economic crash. Only 6% said they were spending more, compared to 30% who said they were spending less.Home values have declined as a result of the economic crash. Twenty-six percent of U.S. homeowners have seen the value of their residences fall significantly during the crash.The crash has also changed the way people work. Many workers have either lost their jobs or only work part time, which means a reduction in the amount of their wages.People have also been psychologically affected by the crash. Unemployed people often become depressed when they cannot find a job after a while. Children also are affected because of such fears as having to move out of their houses, and away from their friends.

Crash: How it happened

How people

were aff

ected

How people changed

POWER WORDS!Disposable income: The part of a persons income remaining after taxes are paid.Necessities: Something you must have to live like food or shelter.

Websites and other helpful information

http://www.stock-market-investors.com/stock-investment-risk/what-caused-the-current-financial-crisis.html

http://rainbowwarrior2005.wordpress.com/2008/10/08/stock-market-historycauses-and-affects/