2008-09 Financial Crises

 What caused the 2008-09 Financial Crises

Origin of the Crises

The financial crises of 2008-09, originated from the united states due to the collapse of the US Housing Market. Due to the contraction of liquidity in the global financial market, it threatened to destroy the international financial system. The crises caused the failure of some of the major investments, banks, insurance companies, and loan associations.

The crises forced western governments to inject funds into their banks to prevent them from bankruptcy. Credit flows to the private sector were reduced similarly, it reduced consumer confidence and closed the business. Higher oil prices forced governments to keep interest rates at a higher level.

Global Response

Amidst the global financial crises, the newly formed G20 of the developed and developing world attempted to reduce the impact of crises on international markets. World leaders committed $5 trillion for IMF and other global financial institutions to boost growth, jobs, and reform the financial sector around the globe.

Conclusion

The economic crises brought weak growth, unemployment, high commodity prices, widening budget deficits, and debt accumulation. Moreover, crises led to austerity trends around the globe. Governments around the world tightened their fiscal policies, widened tax nets, and decreased public spending. With the crises, a new era of protectionism started around the world, governments tend to protect their economic interests first.