The Global Financial Crisis: Causes and Consequences

The Global Financial Crisis (GFC) was a period of economic downturn that began in 2007 and lasted until around 2009. It was triggered by the collapse of the U.S. housing market and the subsequent failure of several large financial institutions.

There were several factors that contributed to the GFC, including the excessive use of complex financial instruments such as mortgage-backed securities and credit default swaps, as well as lax regulation of the financial sector. In addition, many banks and financial institutions had taken on significant amounts of debt, which made them vulnerable to a downturn in the economy.

As the housing market began to decline and defaults on subprime mortgages increased, the value of the complex financial instruments that were tied to the housing market also declined. This led to a cascade of failures in the financial sector, with many banks and other financial institutions being forced to seek government bailouts in order to survive.

The GFC had a significant impact on the global economy, with many countries experiencing a sharp decline in economic growth and high levels of unemployment. It also led to a wave of government interventions and regulations aimed at improving the stability of the financial system and preventing future crises.