Real Cause of 2008 Financial Crisis | Simple & Easy Explanation

What Caused the 2008 Financial Crisis?

Discover the events that triggered the 2008 financial crisis in this comprehensive video. Delve into the factors that played a pivotal role in this economic downturn, from the aftermath of the dot-com bubble burst in 2000 to the impact of the 9/11 attack on the United States.

In an effort to revitalize the U.S. economy, the Federal Reserve took drastic measures, slashing interest rates from 6.5% in 2000 to a mere 1% by early 2003. These historically low interest rates resulted in easy access to credit and an influx of money into the market.

Furthermore, financial institutions relaxed their lending criteria, extending home loans to borrowers with subpar credit scores and limited incomes. These low-quality loans were bundled and rebranded as mortgage-backed securities, garnering high ratings from credit agencies. Subsequently, these securities were sold to investors on Wall Street.

However, as interest rates climbed back up to 5% in 2006-2007, the financial burden on borrowers became unsustainable. This triggered a chain of defaults, setting off a domino effect that ultimately led to the collapse of major banks and had far-reaching repercussions, affecting millions of lives and pushing the global economy into a recession.

Join us as we analyze the intricate web of events that brought about the 2008 financial crisis, shedding light on the lessons learned from this pivotal moment in economic history.

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[Setixir]

I mean you say the banks relaxed their lending practices. It was more nefarious than that. The rating agencies weren't third party neutrals and banks were motivated to sell those sub prime loans just to bundle and sell them. New loans were worth more than ones that had been sitting.

[kingkrispy]

That was a rather clear, concise, and simple explanation, you’ve earned yourself a sub!