Looking through the recent headlines of the US newspapers, one would not probably see the words like “subprime mortgage” or “recession” anymore. Subprime mortgage crisis of 2008 has gone, but the rules of the game have not changed enough. The symptoms are relieved, but the disease itself is not cured completely. Thus, a similar downturn may happen in the future.
The US economy is back on track. Starting in 2010, GDP grew no less than 1.5% annually. According to the US Department of Labour, the unemployment rate this May equaled 4.7%, meaning the figure finally returned to the pre-crisis level. The value of homeowners’ equity in real estate exceeds the level of 2007, and this indicator is expected to grow further (Matthews, 2016). Also, the ratio of household debt to net disposable income decreased. So, the economic situation is good.
However, a few problems of the financial system that were prerequisites of the economic collapse in 2008 are still in place, although the regulations in the banking sector became tougher after the crisis. For example, top-5 banks are still too-big-to-fail. Moreover, they have gained an even bigger market share (Cox, 2015). Besides, today’s regulations are said to still allow for insufficient capital levels combined with investing in too risky assets.
The economic situation has significantly improved since the crisis of 2008. However, a few problems that in 2008 made the financial system fragile remained. Together with continuing globalization of financial industry, it means that the economy is vulnerable to external shocks and the crisis can happen again, this time, more probably because of the external shock, for example, the financial crisis in China (McCoy, 2013).
Works Cited
Matthews S. (2016, March 10). Americans’ Home Wealth Recovers $7 Trillion as Prices Firm. Bloomberg. Retrieved from http://www.bloomberg.com/news/articles/2016-03-10/americans-housing-wealth-recovers-7-trillion-as-prices-firm
McCoy K. (2013, September 9). 2008 Financial Crisis: Could it Happen Again? USA TODAY.
Retrieved from http://www.usatoday.com/story/money/business/2013/09/08/legacy-2008-financial-crisis-lehman/2723733/
Cox J. (2015, April 15). 5 Biggest Banks Now Own Almost Half the Industry. CNBS. Retrieved from http://www.cnbc.com/2015/04/15/5-biggest-banks-now-own-almost-half-the-industry.html
