September 2008 Economy in Crisis

Recently, I stumbled upon an article on the 2008 Wall Street Blues. I now have a better understanding of what triggered the economic crisis - subprime mortgages. This happened when banks created subprime mortgages for people, who would not be able to afford them otherwise. When they failed to make payments, the banks ended their mortgages and took ownership of their houses. As the banks tried to sell the houses, many other properties were worth much less than the loans themselves. The bank lost money and the value of houses dropped further. This is the dominoes fall impact. Big banks collapsed and markets fell over time.

As such, consumers around the world cut down their expenses and made the situation worse, triggering a worldwide recession. The cost of the US Treasury bailout is $700 billion - this is a whopping $2300 for every man, woman and child in the United States!

My parents had their jobs, so we were not affected, but we still watched our expenses carefully. I hope that this will not happen again.