Everyone from homeowners to bankers believed the economy would keep growing. However, unbridled optimism led to immoderate spending, especially for risk-loving investors. The name refers to the contemporary belief that the traditional boom-and-bust business cycle had been overcome in favor of middling but stable economic growth.
This period - from the mid-1980s up to 2007 - was optimistically called the Great Moderation. The two decades before the Great Recession were largely prosperous, with rises in GDP, low inflation, and two relatively mild recessions. Home foreclosures skyrocketed, with nearly three million a year in 20ġ.The US lost $7.4 trillion in stock wealth from July 2008 to March 2009.The unemployment rate reached 10% in October 2009 - rates were even higher among Black and Hispanic households at about 15% and 12% respectively.Gross domestic product ( GDP) fell 4.3%, the largest decline in 60 years.The net worth of US households declined, erasing $19.2 trillion in wealth.While the relative impact of each cause is still debated today, the Great Recession stands as a cautionary tale about risk, investing in what you know, and the dangers of putting full trust and faith in financial experts and institutions.
