Question

can you please help in detail:)

(3) Compare the current economic situation with coronavirus to the financial crisis & recession of 2008-2009. How are they similar and how are they different?

Answer 1

A plunging stock market. The widening obscuration of recession. Fed interest rate reductions and government stimulus.

It's beginning to feel a lot like 2008 again. And not in a good way.

For many Americans, the stomach-churning market drops and growing recession talk of the past few weeks – triggered by the global spread of the coronavirus – are reviving memories of the 2008 financial crisis and Great Recession.

Take a breath. While the toll the infection ultimately takes on the nation isn’t clear, the economic upheaval caused by the outbreak will likely not be nearly as damaging or long-lasting as the historic downturn of 2007-09.

A recession is not inevitable. If we do get a recession, it is likely to be brief and much less severe than the Great Recession. For one thing, the 2008 financial crisis and recession resulted from years of deeply rooted weak spots in the economy but this is not the case this time as it has caused by something outside the economy this outbreak is bigger than the economy. It is a disaster that can wipe out not only the economy but also the human race.

Partly as a result, the economy’s major players – consumers, businesses and lenders – are much better positioned to withstand the blows and bounce back.

Here’s a look at how the current crisis compares with the meltdown more than a decade ago.

The recession was caused by the overheated housing market. Banks and other lenders approved mortgages – including many to buyers who weren’t qualified, driving up home prices to stratospheric levels. The banks bundled the mortgages into securities and sold them to other financial institutions.

When home prices began spiraling down, millions of Americans stopped making mortgage payments and lost their homes while the banks that held the securities were pushed to the brink of bankruptcy.

Widespread layoffs in real estate, construction and banking hammered consumer spending and led to deeper job losses throughout the economy. Bank lending was virtually frozen, grinding the gears of the economy to a near halt. The problems had been simmering in the housing market and banking system for years.

Current crisis. The coronavirus, which originated in China late last year, has sparked today’s economic hazard. There are now more than 100,000 cases worldwide, most of them in China, and the death toll has topped 4,000. In the U.S., more than 800 people have been infected and 28 have died.

Because far fewer people are affected than in 2007-2009, the economic toll has been limited so far. The travel and tourism industry has suffered the most, with businesses canceling conferences and trade shows and consumers scrapping vacation plans. Disruptions to deliveries of manufacturing parts and retail goods from China could temporarily shut down American factories and leave store shelves empty.

Household debt

Great Recession. Since banks freely doled out credit for mortgages, auto loans and credit cards, household debt climbed to a record 134% of gross domestic product, according to Oxford Economics and the Federal Reserve. Americans had been saving just 3.6% of their income at the end of 2007. As Americans worked down that debt, spending fell sharply.

Current crisis. Household debt is at a historically low 96% of GDP. Households are saving about 8% of their income. All of that means they can handle a brief slump and continue spending at a reduced level.

Job losses

Great Recession. Nearly 9 million Americans lost their jobs in the downturn. Unemployment more than doubled to 10%.

Current crisis. Losses are likely to total in the thousands, with travel and tourism and manufacturing enduring much of them, Bostjancic says. The 3.5% unemployment rate, a 50-year low, could rise to 3.8% to 4.1%, says Diane Swonk, chief economist of Grant Thornton.

The stock market

Great Recession: The stock market plummeted 57% during the crisis.

Current crisis. The stock market hasn’t seen the same sizable drop that the broader market suffered in the depths of the financial crisis. The Standard & Poor's 500 slid 14.9% from its Feb. 19 record through Tuesday, teetering on the brink of a bear market, or a drop of 20% from a peak.

there are many more examples but this is enough to get a clear picture.