Financial crisis, 2009

Share in GDP of US financial sector since 1860

The financial crisis of 2007–2009, initially referred to in the media as a "credit crunch" or "credit crisis", began in July 2007 when a loss of confidence by investors in the value of securitized mortgages in the United States resulted in a liquidity crisis that prompted a substantial injection of capital into financial markets by the United States Federal Reserve, Bank of England and the European Central Bank. The TED spread, an indicator of perceived credit risk in the general economy, spiked up in July 2007, remained volatile for a year, then spiked even higher in September 2008, reaching a record 4.65% on October 10, 2008. In September 2008, the crisis deepened, as stock markets world-wide crashed and entered a period of high volatility, and a considerable number of banks, mortgage lenders and insurance companies failed in the following weeks.

Although America's housing collapse is often cited as having caused the crisis, the financial system was vulnerable because of intricate and highly-leveraged financial contracts and operations, a U.S. monetary policy making the cost of credit negligible therefore encouraging such high levels of leverage, and generally a "hypertrophy of the financial sector"

Links

• Credit Crisis Indicators (Updated daily) - Five ways to measure recent market disruption, from the New York Times
• NYU Stern on Finance - Understanding the Financial Crisis
• How nations around the world are responding to the global financial crisis, from PBS

This guide is licensed under the GNU Free Documentation License. It uses material from the Wikipedia.

Video: Davos'09: global crisis in mind (Some 2,500 guests from 96 countries are gathering at the World Economic Forum in Davos. It has already been called one of the most significant Davos forums in the event's 40 year history.)