A lot of economists consider the global economic crises of 2007 to be the worst financial crisis since the Great Depression of the 1930s. The global crisis affected the entire world economy, with higher detriment in some countries than others. It resulted in the threat of total collapse of large financial institutions, the bailout of banks by national governments, and downturns in stock markets around the world. In many areas, the housing market also suffered, resulting in evictions, foreclosures and prolonged unemployment. The crisis played a significant role in the failure of key businesses, declines in consumer wealth estimated in trillions of US dollars, and a downturn in economic activity leading to the 2008–2012 global recession and contributing to the European sovereign-debt crisis.
Causes for the crisis.
The immediate cause of the crisis was the bursting of the United States housing bubble, which peaked in 2006, caused the values of securities tied to U.S. real estate pricing to plummet, damaging financial institutions globally. The financial crisis was triggered by a complex interplay of government policies that encouraged home ownership, providing easier access to loans for subprime borrowers.
The U.S. mortgage crisis triggered a liquidity crisis of world banks. Financial institutions refused to lend to each other or to finance non-financial firms who needed to refinance their debt, or to pay their suppliers, or receive payments from their customers. Battling the crisis demanded a large-scale nationalization of banks.
As a result recession which started in 2008 and continue to the present day, persistent high unemployment remains, along with low consumer confidence, the continuing decline in home values and increase in...
Please join StudyMode to read the full document