2. The challenges of this century

The world’s largest and most diverse economy currently faces the most severe economic challenges in a generation or more.

The financial crash of 2008 brought a sudden, traumatic halt to a quarter-century of U.S.-led global economic growth. The consequences of this shock for the U.S. and world economies are far-reaching.

Since the election of Ronald Reagan as president in 1980, the United States had championed globalization of trade and finance. It opened its doors wider to foreign products and investment than any other major economy. America’s entrepreneurial culture was the world’s model.

But America’s growth came to rely increasingly on debt. Consumers, businesses, home buyers, and the U.S. government itself borrowed heavily in the belief that the value of their investments—including their homes—would continue to grow. The ready availability of credit on easy terms drove home prices, in particular, ever higher.

When the housing boom finally collapsed in 2007, it exposed a fragile layer of high-risk home loans made over a decade to families that could not afford them, particularly if the economy weakened. Some borrowers had purchased homes they could not afford, trusting that in a rising market they could always sell their properties at a profit. As housing prices fell, homeowners who no longer could keep up with their mortgage payments were unable to pay their debt by selling their homes. These home loans thus were the unstable foundation for a massive but largely invisible speculation on mortgage securities and financial contracts sold around the world.

Triggered by the housing collapse, foreclosures grew, and panic followed. Giant Wall Street financial firms fell, reorganized, or were combined with larger competitors. Stock markets plunged, and the world’s economies headed into the worst crisis since the Great Depression of the 1930s.

The catastrophe revealed weaknesses unheeded during the boom. U.S. consumption had for too long outpaced savings. Lessons from past booms and crashes were ignored as many focused only on the present. Financial regulators’ faith in the efficiency of economic markets led them to underestimate the risks.

But the crisis also revealed the ability of the American government to respond quickly and decisively to the challenge. Washington officials responded with unprecedented measures to head off a global collapse of lending. The federal government and the Federal Reserve central bank seized control of the two largest U.S. home mortgage firms and bailed out leading banks and a major insurance company, actions that would have been politically unthinkable before the crisis.

Since the start of the global crisis in 2008, U.S. government agencies and the central bank had pledged an astonishing $12.8 trillion—equal to nearly the entire U.S. annual economic output—in loans, loan purchases, and credit guarantees seeking to halt the financial freefall.

Vocabulary

1. to meet human needs – удовлетворять потребности человека

2. distribution of goods and services – распределение товаров и услуг