The Great Recession was a period of time between 2007 and 2009 when there was a severe economic downturn in many countries, including the United States. It was triggered by a housing market crash, which led to a financial crisis that spread throughout the entire global financial system.
The housing market had been growing rapidly in the early 2000s, and many people were buying homes with subprime mortgages they couldn’t really afford. Banks and other lenders were giving out these loans to many people who didn’t have good credit or steady jobs. When the housing market bubble eventually burst, home prices began to decline, leaving many homeowners with mortgages that were worth more than their homes. This led to a wave of defaults and foreclosures, which caused the value of mortgage-backed securities and other investments based on these mortgages to plummet.
Many banks and financial institutions had invested heavily in these securities, and when their values dropped, many of these institutions became insolvent or went bankrupt. This created a financial crisis, as many investors and businesses lost confidence in the financial system, leading to a credit crunch and a severe economic contraction.
The Great Recession led to high levels of unemployment, a decrease in consumer and business spending, and a decline in economic growth. Governments around the world implemented policies to try to stabilize the financial system and stimulate economic growth, including fiscal stimulus programs and monetary policies such as low interest rates and quantitative easing. The effects of the Great Recession were felt for years, and it is considered to be one of the worst economic crises in modern history.
Check out The Big Short, a movie which details the lead up and development of the crash. If you haven’t already, make sure to watch the other movies on this list of finance classics!