The global financial crisis, also known as the global economic crisis, is the second, worst fiscal crisis the world has ever encountered after the Great Depression, which occurred in the 1930s.  The Great Depression remains nothing more than a myth to many especially the younger generations who have grown used to mild recessions.

Money Injections

Many believe that the world economy crisis commenced in the summer of 2007 as a result of the huge sums of new money created since 2000. New money is created each time a bank makes a loan. A greater percentage of these large sums of the new money created went to residential property which rocketed the house prices quicker than wages, commercial real estate and the financial markets.

The crisis worsened by September 2008 when many borrowers were unable to repay their loans and the stock markets around the world crashed. As a result, banks such as the Lehman Brothers found themselves in a liquidity crisis with the possibility of going bankrupt. This was the primary cause of the global financial crisis.

What was the aftermath of the crisis?

The Global Economy crisis showed the extent to which the world is inter-connected. After the financial crisis, banks panicked and stopped lending.  Borrowers had to sell their property to repay their debts. Furthermore, fast-growing countries such as India and China experienced a sharp slowdown in their economic growth.

Governments of the Western nations had to figure out ways of bailing out major financial powerhouses. Developing countries which relied on western countries for financial support suffered from a reduction in foreign aids, tourism and so on. Globalization has made it possible for countries all over the world to be inter-connected. The credit crunch which began as a local problem in the United States greatly affected all countries that form the global community hence causing the global financial crisis.