The financial crisis of 2008, also known as the Great Recession, was a global economic crisis that originated in the United States and rapidly spread worldwide. It was a liquidity and credit crisis that affected financial markets, the industrial sector, and employment globally.
Causes:
The crisis originated in the United States with the subprime mortgage crisis, which refers to mortgage loans granted to individuals with low credit risk. These loans were offered by banks and other financial institutions that, aiming to increase their profits, bundled them and resold them to other investors as if they were bonds.
The expansion of credit and the real estate bubble in the United States, where housing prices skyrocketed, created a risky situation for investors. When the bubble burst in 2006 and 2007, many borrowers began to default on their mortgage payments, leading to a decline in the value of financial assets.
Triggers:
Subprime mortgage crisis.- The collapse of housing prices and the default on mortgage payments resulted in significant losses for banks and financial institutions.
Lehman Brothers bankruptcy.- In September 2008, the bankruptcy of the investment bank Lehman Brothers triggered a crisis of confidence in the financial system and caused a collapse in stock markets.
Liquidity crisis.- The lack of confidence in the financial system created a liquidity crisis, where banks struggled to obtain credit and pay back money to investors.
Consequences:
Global crisis.- The crisis quickly spread worldwide, affecting financial markets, the industrial sector, and employment in many countries.
Economic recession.- The crisis caused an economic recession in many parts of the world, with declines in production, trade, and employment.
Government intervention.- The governments of many countries took measures to mitigate the crisis, such as injecting capital into banks, creating economic support programs, and implementing financial regulatory measures.
In summary, the financial crisis of 2008 was a global crisis that originated from the subprime mortgage crisis in the United States. The expansion of credit, the real estate bubble, the collapse of Lehman Brothers, and the liquidity crisis triggered an economic recession and forced governments to take measures to mitigate the crisis.
