Each century has its own unique economic challenges. The first two decades of the 21st century have been no different in that respect—here are the most economically impactful events that have occurred so far. The crash was fueled by global investor fears about the coronavirus spread, which was anticipated to cause oil price drops and a recession. On March 11, 2020, the World Health Organization declared the novel coronavirus a pandemic. As a result, most governments closed non-essential services. In just a few months, the pandemic devastated the U.S. economy. In the first quarter of 2020, growth declined by 5%. In April, retail sales plummeted by 16.4% as governors forced the closure of non-essential businesses. The closure put many people out of work, lifting the number of unemployed workers to 23 million. The pandemic’s total impact on the global economy will be under investigation for many years to come. Recent projections show that global poverty is on track to fall back to 2017 levels after more than 20 years of continuous reduction. The UK officially left the EU on January 31, 2020. Economic growth dropped significantly in the first quarter, reaching a low not seen since 2003. At the time, the British government estimated that Brexit would lower economic growth by 6.7% over 15 years. Over the next year, the British economy began to rebound—even with the coronavirus epidemic—nearly reaching pre-Brexit levels of output by the end of 2020. China still has a smaller gross domestic product (GDP) than the U.S., but it is leading in annual growth. PPP and GDP growth have shifted the economic balance of power, effectively pushing the U.S. down to second place. China is also the second-largest holder of U.S. debt. That position gives it leverage when negotiating policies regarding imports and exports. For example, China’s holdings of U.S. debt allow lower interest rates and cheaper consumer goods for the U.S. If China were to call in its debt, U.S. interest rates and prices would rise, slowing America’s economic growth—however, that would be a double-edged sword for China. Calling in debt would result in a loss of trade leverage and would cost it much of its export market. The U.S. imported $435 billion worth of goods from China in 2020. In 2015, Greece nearly defaulted on its debts. To avoid default, the European Union (EU) loaned Greece enough to continue making payments. It was the biggest financial rescue of a bankrupt country in history. It also triggered the Eurozone debt crisis. Greece’s debt crisis triggered concerns that other heavily indebted EU members would default as well. The crisis led to bailouts for other countries and caused many to question the viability of having one currency for the EU. Expanding coverage reduced the country’s overall tax burden, because federal, state, and local governments could reduce healthcare spending further. As a result, the rate at which healthcare costs rise has slowed somewhat. However, projections still show that healthcare expenditures are expected to continue increasing. The waves damaged the Fukushima nuclear power plant, creating radioactive leaks. The “Triple Disaster” devastated Japan’s economy. It crippled the country’s nuclear industry and convinced Europe to cut back its reliance on nuclear power. On Monday, September 15, 2008, the large investment bank Lehman Brothers, which was heavily invested in these securities, announced bankruptcy. On September 16, the American International Group (AIG), the world’s largest insurance company, announced that it was going bankrupt. Many investment funds owned AIG’s stock and derivatives—this led to an avalanche of stock value collapses, which took much of the market down. On September 29, 2008, the Dow Jones Industrial Average (or “Dow”) fell by 777.68 points. Between October 9, 2007, and March 6, 2009, the Dow dropped by 50%. On October 3, 2008, Congress passed a $700 billion bailout bill, now known as the “Troubled Assets Relief Program” (or “TARP”). On October 14, the Treasury used $350 billion for the Capital Repurchase Program, which purchased preferred stock in major banks. The 2009 economic stimulus package sought to reassure investors and end the recession. It spent over $179 billion in tax relief, health services, and unemployment compensation, and helped to ease investor concerns and end the recession. Investors began making huge profits from the derivatives that mortgage-backed securities were based on. Average new home prices fell by 22 percent, from their peak of $262,600 in March 2007 to $204,200 in October 2010. At the same time, the Federal Reserve raised interest rates. Many homeowners had adjustable-rate mortgages that followed the fed funds rate. When rates rose, so did monthly premiums. Many homeowners lost equity in their homes or couldn’t sell them or meet the increased monthly payments. Many defaulted on their mortgages, and the securities created from these mortgages dropped significantly in price, which influenced the financial crisis. The attacks caused the stock exchange to close. When it reopened, the Dow dropped by almost 700 points. The attacks deepened the 2001 recession caused by the bursting of the dot-com investing bubble. They also led to the implementation of the War on Terror. The costs of the wars in Afghanistan and Iraq continued to increase. The latest studies reveal that they exceeded $6.4 trillion.
