The Role Played By Government In Economic Recovery

With more or less the entire planet feeling the consequences of the recent economic crisis

, the world is looking for answers on how to rectify the problem and make sure that it doesnt happen once more in the future.

The sub-prime mortgage loan problem had such an effect that lenders weren't ready to release cash into the system, which meant that everything came to a halt. Without credit, several companies found that they could not fulfill their business requirements which meant that they had to shut down. The closing of businesses is never a good thing because it means that more individuals are made unemployed. Unemployed individuals have no money to spend which has a further effect on more businesses. The issue becomes a recurring one and if not kept in check, it will spiral out of control.

To initiate a recovery, governments could take numerous options. One such option is to create jobs. Creating jobs can be a costly affair though since it means creating whole new industries which didn't previously exist. For instance, new technology such as the internet could be used to generate jobs whereas before there were none. The cost of undertaking such problems could be recovered by privatization, like selling government owned infrastructure, like train networks or communication organizations, to private buyers.

Another commonly seen method to kick starting a stalling economy is by way of tax breaks. Tax breaks for business could mean the difference between closing, staying afloat or even firing and hiring staff. For people, tax breaks will mean that they have got more available cash to spend, which has a constructive impact on commerce.

Taxation can also be utilized as a way to encourage individuals to spend, for example the recent first time home buyer tax credit was intended to encourage potential homebuyers to purchase a house, thus helping to stimulate the housing market.

One thing for sure regarding this latest monetary crisis is that it has made it clear that things need to change. People and businesses alike are now ever more aware that that we cannot rely on credit as much as we used to. Those who were heavily dependent on credit to function and live their daily lives found that they could no longer manage when credit was no longer available.

What else is quite apparent is that financial institutions must be much more cautious in the future not to leave themselves over exposed in the markets. With so many banks struggling or even closing altogether, it's certainly a wake up call informing us to be more careful.

One of the more unfortunate factors that were revealed by the crisis was that it exposed a common practice of corrupt dealings in the finance sector. Several top executives of companies have been found to be fraudulent, expecting never to be discovered while others were found to be just plain greedy.

From careless practices, to greed and corruption, the fortunate amongst us could be thankful that things didnt become more worse. One might also say that it was a good thing to happen because it opened our eyes to some basic things that need fixing.

by: Cory Boatright

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