Determinants Of The Crisis Of Colander s A Manifesto For...

Though there are numerous determinants that resulted in the Financial Crisis of 2008, wage stagnation for the majority of Americans and increasing income inequality are among the most influential. The housing bubble that was fueled by subprime lending and indebtedness was a subsequent result of these two determinants. This essay will analyze the two factors (income inequality and wage stagnation) that contributed to the onset of the crisis, factors that are prolonging the crisis--expressed from the position of Colander’s â€Å"A Structural Stagnation Policy Dilemma† and â€Å"A Manifesto for Economic Sense†--as well as provide a link between inequality and unemployment. Ultimately, this analysis will evaluate several hypotheses to further identify†¦show more content†¦Moreover, as the top percentage of Americans accumulated more wealth, the remaining percentage (primarily the middle-class) wages stagnated. This furthered the income inequality between the wealthy elite--those who had the financial means to significantly influence politics--and the middle and lower classes--those who struggled to maintain the basic welfare of their families and their social standing. As the gap increased and financial policies began to benefit primarily the top percent of wealthy Americans, the remaining percentages were forced to spend more for critical services like education and health care even though their wages were stagnated. This resulted in households spending larger portions of their incomes and saving less for the long run. Debt accumulation for middle-class and lower-class households rose significantly in the decades prior to the crisis. (Within the financial sector, debt rose from â€Å"22 percent of GDP in 1981 to 117 percent in 2008). As households spent more and saved less, they began relying heavily on loans and speculation to sustain their spending. The housing market in the late 1990s and early 2000s became the primary focus of spending--with banks giving out loans for houses far beyond the financial means of the one’s acquiring them. As J. D. Wisman asserted in Wage Stagnation, Rising Inequality, and the Financial Crisis, â€Å"the housing market was greatly stimulated by very low interest rates