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2007-2008 Financial Crisis Paper

465 Words2 Pages

Introduction The recent financial crisis that took place in 2007-2008 had a huge impact on the U.S economy. However, the impact also affected the global economy. The U.S. banking industry was adversely affected which consequently led to banks tightening their lending terms and standards, an economic condition that drove the economy into a halt. To this day, the world economy is yet to fully recover from the aftermaths of the 2007-2008 global financial crises that started in the U.S. The Lehman Brothers collapse in 2008 initiated the domino effect in terms of the global economy experiencing a widespread depression, which dramatically stunted economic growth. The large-scale recession in 2008-2009 led to credit crunch which further strangled the economy leading to job losses, foreclosures, decline in consumer spending and banks tightening their lending terms. Thesis Statement The purpose of this paper is to …show more content…

In addition, the current financial crisis was as a result of housing bubble which took place in 2007-2008, and was caused by the greedy banking institution which strayed away from the traditional practices used in lending. The greedy lending practices meant that banks favored subprime mortgage and higher returns at the expense of sound lending practices. It is for this effect that the six years later, the U.S. economy and the entire global economy is yet to recover from the aftershocks of the recent recession. Today, Federal Reserve has worked hard to keep interest rates at a very minimum respectable level to bolster economic growth. This means that the banking industry can stimulate economic growth by lending. Lending stimulates liquidity, thus spurring aggregate demand. Quantitative easing has also stimulated economic growth, as it ensures sufficient liquidity in the economy, which results in countering the effects and aftershocks of the 2007-2008

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