The US Economy Introduction It is the government’s dream for every US citizen to own a home. This will see taking pride in property ownership and thus much engagement with the community around. The problem with the United States of America is that homes are expensive to own and thus most of the American citizens rely on taking loans when buying houses. In the year 2000 the mortgages rates were at a record low and this allowed many people borrow loans at low monthly rates; at the same time the home prices rose dramatically and this acted as an incentive to many financial institutions allowing people to borrow loans and then use their mortgages as collateral. The rising home prices gave home owners the much needed equities and thus most home owners took second mortgages in the believe that the ever rising prices of their homes could refinance for their mortgages. While some people used their money wisely others resorted to using the money to maintain their standards of living and thus when the crisis erupted they were among the worst hit. During this process most of the banks and other financial institutions failed to notice that though the home prices were increasing, individual incomes were not and thus resettling the debts could always be through borrowing and this was risky (Prichard 6). In the year 2005 the worst began to happen, house prices stated declining and the cases of default rose to over 30% from a previous record of 6%. This crisis spilled over to other sectors of the economy and this provoked a public outcry and decisive measures had to be taken. Sometimes one feels like sympathizing with the people who are lost and continue to lose their assets but may be the mortgage crisis was after all the natural process of weeding out the fiscally irresponsible as Charles Darwin would say in his creation theory. What Triggered the Mortgage Crisis? The housing bubble began to burst in 2005 and as shown in the graph below house prices can be said to have been increasing. In the year 2006, the home prices however started to decline and by the end of year 2007 the rates had declined up to negative levels, those who had borrowed loans with their houses as collaterals could no longer afford and thus stopped paying for the mortgages monthly payments and the rates on mortgages kept going higher and higher. The homeowners could no longer afford paying for their mortgages and the choices that remained were few. They could either renegotiate with the financial institutions which had led them the mortgages or just wait for the foreclosures and while many others tried to reduce their spending to increase the income there was nothing much left that they could do to save themselves and thus they subdued. The banks were also faced with a major challenge in recovering their money after foreclosure. With the house prices having declined to such negative rates (as shown below) there was no way the banks could recover their money fully. Another issue which took the crisis further was that the companies that had been issuing the mortgage sub prime loans had invested their money in hedge funds which after becoming worthless forced many to file for bankruptcy this resulted in further enormous losses in the economy. The Americans had