The Great Recession was a global financial crisis that lasted from 2007 to 2009. It was the worst economic downturn since the of the 1930s. The recession began in the United States, but quickly spread to other countries around the world.
There are many factors that caused the Great Recession. In this article, we will discuss 10 of the most important reasons why the recession happened.
The Housing Bubble
The housing bubble was one of the main causes of the Great Recession. It was caused by a combination of low interest rates, easy credit, and speculation.
Low interest rates made it easier for people to buy homes. Easy credit meant that people with poor credit could get mortgages. And speculation led investors to believe that prices would continue to go up.
The problem with bubbles is that they eventually burst. And that’s what happened with the housing bubble. Prices started to fall in 2006, and by 2008, the bubble had completely collapsed. This led to a wave of foreclosures and a sharp decrease in home values.
The Subprime Mortgage Crisis
The subprime mortgage crisis was one of the key causes of the Great Recession. It began in 2007 when homeowners started defaulting on their mortgages at an alarming rate. This caused a ripple effect throughout the economy, as banks and other financial institutions began to lose money.
The subprime mortgage crisis was caused by a number of factors, including lax lending standards, borrowers taking out loans they could not afford, and the rise in adjustable-rate mortgages. As more and more people defaulted on their loans, the crisis deepened, eventually leading to the collapse of Lehman Brothers and the Great Recession.
The Lehman Brothers Bankruptcy
The Lehman Brothers bankruptcy is often cited as one of the key triggers of the Great Recession. The investment bank filed for bankruptcy on September 15, 2008, after years of risky investments and mounting debt finally caught up with it. The bankruptcy sent shockwaves through the global financial system, and Lehman’s collapse is widely seen as one of the worst corporate failures in history.
While the Lehman bankruptcy was certainly a major event, it was just one piece of a much larger puzzle. The roots of the Great Recession can be traced back to a number of factors, including the housing bubble, the subprime mortgage crisis, and the European debt crisis. But the Lehman bankruptcy was definitely a key turning point that helped send the world economy into a tailspin.
The European Debt Crisis
The European debt crisis began in early 2010 and was characterised by a number of sovereign debt crises that affected countries in the European Union (EU). The most notable of these crises were those in Greece, Ireland, Portugal, and Spain.
The causes of the European debt crisis are varied and complex, but can be broadly summarised as follows:
- The global financial crisis of 2008-2009 had a significant impact on Europe, causing many banks to fail and leaving many governments with large budget deficits.
- Several countries in the EU, including Greece, had been running large budget deficits for several years prior to the crisis. This made them particularly vulnerable to the effects of the financial crisis.
- In response to the financial crisis, many countries in the EU implemented austerity measures, which included cutting government spending and raising taxes. This further exacerbated the economic problems in these countries and led to increased levels of debt.
- The euro is a common currency used by many countries in the EU. This means that when one country experiences an economic downturn, it can have a ripple effect on other countries using the same currency.
- The structure of the EU itself has been criticised as being flawed and contributing to the debt crisis. For example, there is no centralised authority responsible for overseeing fiscal policy in the EU, which has made it difficult to coordinate a response to the crisis.
The Great Recession
The Great Recession was a global economic downturn that began in 2007 and lasted until 2009. It was the worst recession since the Great Depression of the 1930s. The cause of the recession was a financial crisis that began with the collapse of the subprime mortgage market in the United States. This led to a Lehman Brothers bankruptcy and a European debt crisis. The Great Recession caused a sharp increase in unemployment, poverty, and homelessness. It also led to a decrease in consumer spending and business investment.
In conclusion, the Great Recession was caused by a number of factors, all of which can be traced back to . The housing bubble, the subprime mortgage crisis, the Lehman Brothers bankruptcy, and the European debt crisis all played a role in causing the recession. While there are many factors that contributed to the recession, it is clear that great business ideas were at the heart of the matter.