Harness Money

When the this crash happened I was in college. After graduating college it was difficult to find work, because companies were focused on decreasing their workforce rather than increasing their workforce.

The stock market crash of 2008, often referred to as the Global Financial Crisis or the Great Recession, was a severe worldwide economic crisis that had its roots in the United States housing market.

It took many years, if not a decade for the the economy to recover.

This is what happened:

Causes:

1. Housing Market Bubble: In the early 2000s, the U.S. experienced a housing market boom fueled by easy access to mortgage credit, low interest rates, and speculative investments. As housing prices soared, many borrowers took on risky mortgages, including subprime loans.
2. Subprime Mortgage Crisis: Subprime mortgages were loans given to borrowers with poor credit histories or high risk of default. As housing prices started to decline in 2006, many borrowers found themselves unable to meet their mortgage payments, leading to a wave of defaults and foreclosures.
3. Financial Instruments and Risky Practices: Financial institutions created complex financial instruments, such as mortgage-backed securities (MBS) and collateralized debt obligations (CDOs), which packaged these subprime mortgages. These instruments were often highly leveraged and difficult to value accurately.
4. Failure of Risk Management: Banks and financial institutions underestimated the risks associated with these complex financial products and held significant amounts of toxic assets on their balance sheets. They also relied heavily on short-term funding and complex interdependencies, making the financial system vulnerable to shocks.

Events Leading to the Crash:

1. Bursting of the Housing Bubble: As housing prices declined and mortgage defaults increased, the housing market bubble burst. This had a cascading effect on the financial system, as the value of mortgage-backed securities and related financial instruments plummeted.
2. Collapse of Financial Institutions: Several prominent financial institutions faced severe financial distress or collapsed, including Lehman Brothers, Bear Stearns, and Merrill Lynch. This caused panic in the financial markets and a loss of confidence in the banking system.
3. Global Contagion: The crisis quickly spread from the U.S. to other parts of the world, as interconnectedness in the global financial system meant that problems in one country could easily affect others. Stock markets worldwide experienced sharp declines, credit markets froze, and economies entered recession.

Impact and Consequences:

1. Economic Recession: The stock market crash of 2008 triggered a severe economic recession, commonly known as the Great Recession. Unemployment rates surged, consumer spending declined, and businesses faced financial difficulties, leading to a contraction in economic activity globally.
2. Government Interventions: Governments and central banks implemented various measures to stabilize the financial system, including bailouts of troubled institutions, interest rate cuts, and liquidity injections. These efforts aimed to restore confidence and prevent a complete collapse of the financial system.
3. Regulatory Reforms: The crisis exposed weaknesses in the financial system and led to significant regulatory reforms. Governments implemented stricter regulations on banks and financial institutions to enhance transparency, risk management, and accountability.

Lessons Learned: The stock market crash of 2008 highlighted the importance of prudent risk management, effective regulation, and transparency in the financial system. It served as a reminder of the dangers of excessive risk-taking, speculative bubbles, and unsustainable lending practices. The crisis led to ongoing discussions about the need for responsible financial practices, enhanced oversight, and robust risk assessment in order to prevent future crises.

Overall, the stock market crash of 2008 was a pivotal event that had far-reaching consequences on the global economy and financial markets. Its impact and lessons continue to shape discussions and policies in the financial sector to this day.