The 2008-2010 Financial Crisis and How It Affected US Citizens

The 2008-2010 financial crisis has had wide ranging and long-term implications for the world and US economies, and it has been the focus of much media attention over the last few years. The crisis also has a significant impact on the personal finances of many US citizens.

Some of the effects that have been felt by US citizens are the direct consequences of the financial practices that produced the crisis, such as the provision of sub-prime mortgages to people who have struggled to repay their debts. Many people have ended up losing the homes that they bought in the years leading up to the crisis, with some areas of the United States experiencing incredibly high rates of foreclosure.

The financial crisis has also had other effects on citizens of the US, including those who were not directly affected by the problems that caused the crisis. Individuals have suffered from the loss of growth and income that their savings and investments would have produced. Interest rates for savings have dropped sharply, leaving US citizens struggling to find savings that will enable them to keep up with inflation, let alone to start building up their savings for the future. Investors have seen stock in many companies faltering or dropping rapidly, resulting in serious losses for individual investors and not just for the companies themselves of the financial industry. One of the most common ways in which the financial crisis has affected individual savings and investments has been through its effects on retirement funds. People who have been planning for a comfortable retirement using retirement plans that are often largely based on mutual funds and the performance of the stock market have had to face the fact that they may not be able to retire as and when they had planned. They may need to keep working longer or to reduce their expectations for retirement.

The financial crisis has affected governmental and public institutions as well as private companies. This has significant implications for those who are employed by such bodies, but it can also affect other US citizens, who may suffer from the losses of services or benefits as cuts are made. The effects on government spending are likely to have long-term consequences for the provision of all sorts of services.

Many individuals have also been affected by the financial crisis because of its effects on their employers. At the end of 2008 and beginning of 2009, the gross domestic product of the US, which is the total amount of goods and services produced by the country, was reduced by about six percent compared to the previous year. As many companies shave struggled to cope with the crisis, large numbers of people have lost their jobs. The unemployment rate grew to 10.1 percent in 2009, which was the highest it had been since 1983 and about twice the rate immediately before the crisis. Losing your income can be difficult at any time, but the financial crisis has made unemployment worse for many people because it has become more difficult to find a new job. Many companies have been reluctant to hire any new people, and with the extra competition created by the high unemployment rate, finding a new job has become even more difficult than usual. Recent graduates looking for their first jobs have experienced similar difficulties in finding employment, which in combination with their student debts has resulted in serous problems for many young US citizens.

Borrowing money has now become more difficult. People are finding it harder to obtain low cost loans or credit cards, while expensive payday loan services have been flourishing. Qualifying for credit, particularly for a mortgage, has been made more difficult, and although this could help to prevent some of the problems of the past from arising again and leading to another crisis, it has made life more difficult for many individuals in the US who need to borrow money or who are ready to buy their own home. However, those citizens who want to buy their own home have found that property prices have been dropping in many parts of the country, often from values that were beyond the reach of many first time buyers. This has made it possible for some individuals to buy homes that they would not have been able to afford before the start of the financial crisis in 2008. Unfortunately, those individuals who already owned their own home have tended to see its value drop dramatically. This has left some people repaying mortgages that are worth more than the current value of their property and it has become more difficult for many sellers to find a buyer who is willing to give them the price they desire.

The crisis had a greater effect on those in the lowest income groups, which led to greater inequality in the US. In 2007, the richest one percent of people in the country owned 34.6 percent of the nation's wealth. By 2009, their share had increased to 37.1 percent.

More information about the relationship between personal finance and the wider economy, including a discussion of mortgages and mortgage refinancing in the US, is available on the usdta.org website.