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Researchers Struggle to Determine Clear Recession Cause



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By : Gary Ashton    99 or more times read
There are thousands of former home owners across the country who are shaking their heads and wondering where things went wrong in their pursuit of the American dream. So many people around the country have lost their financial stability and their homes and are really at a loss as to how everything has fallen, crashing around their heads.

There are a few things that the university researchers have discovered however; the elements that contributed to the recession which many people think are the primary causes of it, are not. While many people think that the sources of the current economic downturn are fairly obvious, like dishonest lenders and borrowers lying to qualify for loans that they could not really afford, the true reasons for the economic recession are at this time still unknown according to researchers from Harvard University and the University of Pennsylvania who have conducted a study on the causes of the recent recession.

The housing bubble crash which triggered the recession was not, they discovered, caused by the low interest rates and easily attained home loans. Both of these situations were definitely contributing factors, but they weren’t the main cause, according to the University researchers. There seems to be agreement that the Federal Reserve is greatly responsible for the results of the artificially low interest rates that helped drive the house buying frenzy but low interest rates themselves were not the primary cause of the resulting housing bubble, researchers say.

One of the key factors of a housing bubble is when people inexplicably expect that real estate values are going to climb continually, with no end in sight; which we have definitely seen while the bubble continued to inflate, before the recession. Housing prices were driven up by upwards of 70 percent over the years between 2000 and 2006 as home buyers joined into the frenzy of home buying.

While public comments about this study suggest that many people do not agree that the Fed is not more responsible for building the housing bubble, the case appears to be more complex than that simple scapegoat. The researchers determined that at this time, we really do not understand why people came to the unlikely conclusion that housing values would defy logic indefinitely; but unfortunately it seems like whatever caused that response was the driving force behind the housing bubble to inflate like it did. Hopefully we have learned enough from this bubble for buyers to not help inflate another one anytime in the near future.
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