What is the 07-08 financial crisis?
In 2007, the world went into a global financial crisis also known as the Great Recession. Experts say it’s the worst economical crisis since the Great Depression in the 1930s. It officially started in December 2007 and ended in June 2009. It started in the U.S then spread out to the world, however, China, India and Brazil were not affected.
What triggered it?
House prices shot up due to the government forcing banks to loan money to borrowers with low credit scores and having low loan approval rates. The lenient regulations imposed by the government also allowed predatory loaners (aka ‘’loan sharks’’) into the private sectors. Basically, the U.S. government became too lax with its regulations. However, this isn’t the only cause of the crisis. Toxic subprime mortgages and low-interest rates also played a part.
Overall effects?
The American GDP ( gross domestic product) fell by 4.3%, the employment rate doubled from less than 5% to 10%. This issue also spread worldwide with several bank failures and worldwide economies being slowed down. Tons of businesses went into bankruptcy, the housing market was suffering and international trade was usually declined. The world economy lost $2 trillion worth of economic growth and more than half of the countries in the world were affected by this crisis.
The good news?
Many people were able to recover the losses they suffered during the crisis and new acts were put in place to prevent a calamity like this ever again. Household debts also declined after the crisis, made the younger generations more cautious in their financial management and actually led to more concern for the environment. Obama formed the Consumer Financial Protection Bureau to financially reform the economy. Basically, we learn from our mistakes.
Sources:
insider.com
investopedia.com
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