Financial Crisis 2007-2008
Essay
The financial crisis of 2007-2008 was a global crisis that led to a
steep decline in the value of financial assets. The crisis was
triggered by a housing bubble in the United States that rapidly
expanded over several years to the point that many homeowners
were unable to keep up with rising mortgage payments. The
rapid growth of the housing market raised concerns that an
increase in the supply of mortgage loans could lead to a run on
the bank system. A similar situation had occurred during the
previous financial crisis in the late 1990s. In response to this run
on the banking system, regulators around the world initiated a
series of regulations designed to prevent the spread of the crisis.
These regulations included limits on the amount of debt that can
be taken on by banks, limits on the amount of money that can be
borrowed from banks, and restrictions on the kinds of
investments that banks can make. The global response to the
crisis caused a significant decline in the value of assets,
including stock and bond markets around the world. As a result,
many people lost their savings and many businesses failed. The
economic crisis also led to a decline in global trade and a sharp
increase in the unemployment rate in many developed and
developing countries. The Financial Crisis of 2007-2008 began
in the United States in response to the rapid expansion of the
housing market that led to an increase in the level of credit
available to homeowners. This led to an increase in the level of
debt that was taken on by mortgage lenders and encouraged
investors to put their money into the market. In addition, many
investors were encouraged to invest in higher-risk investments
such as high-yield bonds and high-yield.