The Financial Crisis Of 2008-2009

Better Essays

The financial crisis of 2008-2009 was an extremely significant event in recent history and has been described as “perhaps the most important economic event since the Great Depression” (Gorton & Metrick, 2012, p.g. 150). We are still experiencing the effects of the crisis today and there is a considerable amount of literature on the subject. There has been much research into the crisis and what caused it (Gorton and Metrick, 2012). Using some of this research both the causes and effects of the financial crisis can be explored. This essay will discuss what happened in the months leading up to the crisis, the causes and effects of the financial crisis and tackles some of the questions that researchers have asked regarding the events of 2008-2009.

Mishkin (2011) discussed the idea that when analysing the causes of the financial crisis the events should be split into two separate periods. The period occurring towards the end of 2007 and beginning of 2008, which involved lending within subprime markets and the end of the housing bubble, and the second occurring in September 2008, beginning with the bankruptcy of Lehman Brothers (Mishkin, 2011, Gorton & Metrick, 2012).

Although the start of the financial crisis is thought of by most to be in September 2008, when investment bank Lehman Brothers declared bankruptcy, some of the main contributing factors actually occurred prior to 2008. During the early 2000’s interest rates were low and as a result more people were able to afford

Get Access