Background of the 2008 global financial crisis


  This is a global financial crisis caused by the bursting of the real estate bubble in the United States. It was not only the largest financial crisis after the Great Depression in 1929, but it also affected most countries in the world. In the run-up to the outbreak of the crisis, the house price in the United States rapidly increased to the highest value of the house price index since 2000 in July 2006. Still, the demand saturation, a price level is not sustainable, consumption growth is no longer sustainable, and the house price bubble bursts.

Source: S&P Dow Jones Indices LLC

  The investment value of many financial institutions and banks is based on residential mortgage loans. The value of the mortgage depreciates due to the sharp decline in the housing price. Financial institutions and banks find it difficult to discount the mortgage, and their operation ability is reduced. This leads to a lack of confidence in banks and financial institutions, and investors no longer choose to deposit their cash in banks, which makes banks lose a lot of cash and eventually go bankrupt. This phenomenon instantly transferred the collapse of the real estate industry to other industries, which caused other industries to be affected.

  From 2000 to 2007, American consumers accounted for most of the world's markets,  the rest of the world depended on them for profits, and the toxic securities of America's best-known institutions were owned by global corporations and investors. As assets were sold to repay debts that could not be refinanced in frozen credit markets, the solvency crisis was further exacerbated, and international trade with the United States were affected by the American financial crisis. So the crisis in the United States gradually spread around the world. And the global financial crisis led to the regional financial crisis.



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