Demonstrators in Philadelphia try to draw attention to the subprime mortgage crisis. (AP Photo/Matt Rourke, file)

The worst financial crisis in more than 70 years is expected to get worse. The economy declined quickly in the last half of 2008. The decline was happening faster than at any time since since the Great Depression in the 1930s.

The poor economy is expected to cause problems for consumers. Many jobs have been lost as a result of the downturn. Home values and stock prices have fallen. Banks have reduced or stopped lending money. People are shopping less. When they do, they are spending less. Some people have switched to shopping at discount stores instead of at higher-priced stores.  

National governments were making changes almost every day to deal with the problem. All of the solutions are expected to take time to show improvement.

Governments worldwide acted quickly to try to fix the problems. Historians say governments waited too long during the Great Depression to act. They say that made the problems worse.

The US is in a recession
The United States of America is believed to have entered a recession. There is no official definition of a recession.

Most observers generally agree a recession is when the national economy does not grow for two quarters in a row. For purposes of watching the economy, a quarter is three months.

Most observers believe the economic trouble started with the excessive use of subprime loans given to home buyers in the U.S. People with little money or income often take out subprime loans to buy houses.

The low-interest loans usually are for short periods like one to three years. The first years of the loan have a low interest rate. The rates usually increase a lot when the loans are renewed after a few years.

Some buyers find out they cannot afford to pay the higher rates. Those people then are forced to sell their homes or let the lenders take over their properties. That drives down the value of the properties. One downturn causes another downturn in such a situation.

Subprime loans have been used for decades. But they became more popular in the last few years.

Those loans were then sold to investors all around the world. Many times the loans were sold again at higher prices. That is why this crises is causing money problems in other countries.   

A larger number of subprime loans defaulted than expected. A default occurs when people do not re-pay loans. Some economists say about 25 percent of subprime loans went bad.   

When home buyers stop paying, the loans started collapsing. The damage was dramatic. Some estimates say home prices have dropped about 20 percent.

Little or no government control
A third factor in the crisis is believed to be the failure of government to control lending. Many observers say U.S. President George Bush is to blame for some of the problem. Bush has long supported letting businesses operate without much government control.

The U.S. government tried to stop the decline with a $700 billion plan. President Bush signed the plan into law on October 3rd.

The plan allows the government to buy and hold bad loans from lenders. It is hoped that lenders will then resume making loans to people who are more likely to re-pay the money.

Nobody knows for sure if the plan will work.

159,000 jobs lost in September
Stock markets worldwide have been dropping. Prices of stocks dropped about 35 percent from their high last year. Prices fell because more owners wanted to sell than buy.  Some indexes show the stock market lost almost 15 percent in the first six business days of October.   

The U.S. government reported 159,000 people lost their jobs in September. It was the ninth straight month that more people lost jobs than were hired.

The national unemployment rate in September was 6.1 percent. Some analysts expect the rate to hit 8 percent in early 2009.