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Perhaps the shocks of the financial crisis and economic recession have highlighted the importance of saving for a rainy day. Housing prices had been rising for a very long time, and the collapse of the housing market took most by surprise. The stock market had also been flourishing for a very long time. Prior to the financial crisis, there was great optimism in the investment arena that stock market returns would continue to be high and that equity values in homes would continue to flourish. Many people invested all their retirement funds in the stock market, overleveraged on their credit cards, and others refinanced their homes repeatedly. When many lost their homes to foreclosure, lost most of their retirement funds in the stock market during the financial crisis, and lost their jobs because of the economic recession, the absence of significant savings or no savings meant that they had nothing to fall back on.
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To prevent the occurrence of future financial crises and economic recessions, achieving a well-regulated financial system is a sine qua non. It is also important to reduce the budget deficit to an acceptable level. Moreover, it is important to educate consumers to borrow moderately. Excessive borrowing by the Government and consumers contributes to systemic risk
A suggestion that is often made is that the U.S. should reinvent itself and shift its focus to high-end products to increase its exports. However, whatever advantage it finds in producing high-end goods will only be temporary. Other countries will develop those technologies with time and possibly at cheaper prices. It is important that the U.S. learns to compete better in the present global environment in the production of lower-end manufacturing products and delivery of services. There is also a need for a national conversation on how to reduce the trade deficit
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