Do you remember the 2008 financial crisis? The Great Recession impacted our lives heavily. In this post, we will talk about that situation. Some of the reasons behind that crisis, the impacts we are facing till now, and aspects that we must learn from that recession.
If you are running a business in the US, you need to handle your taxation carefully. Look for a sales tax attorney near me and get help from him on business taxes. After finishing this write-up, you will know about some of the points that are common during every crisis. Whenever you see these patterns, be fearful about them.
What Were the Reasons Behind The 2008 Financial Crisis?
Many of us know about the 2008 financial crisis but don’t know the exact reasons behind that. Today, we will tell you some of the most important factors responsible for the crisis and market fall.
- Bubble in the Housing Market
The US housing market was primarily responsible for the 2008 stock market crash. At that time, the price of houses grew massively, creating a bubble. More and more people were buying homes by taking easy loans offered by banks. People who didn’t have substantial income also took these loans. In the end, the bubble burst, leaving a great impact on the stock market.
2. Mortgage Lending
You must have heard about subprime mortgage loans. These are high-risk loans for people who don’t have substantial credit scores. Earlier, we told you about the housing market bubble. Most people were using these subprime mortgage loans to fulfill their dreams. When you offer loans to people who can’t actually afford the loan, it is bound to doom one day.
3. Lack of Security for Mortgage Debt
Banks were hugely responsible for that crisis. They created complex financial products like mortgage-backed securities (MBS) and Collateralized debt obligations (CDO). Investors all over the world bought those substandard items. Even credit rating agencies assigned fraud ratings to these investment options.
4. Excessive Risk-Taking
There should be a limit to taking risks. Excessive risk is going to ruin the market every now and then. Whenever you are investing your hard-earned money in the market, try not to take much leverage. It will increase the risk of getting you in trouble. Contact a CDTFA tax auditor who can help you manage your tax matters.
Long-Term Impact of The Crisis on The Global Market
Since the 2008 financial crisis, we have been dealing with many issues. Let’s examine some of the areas where we have faced issues.
- Recession All Over the World
Right after the crisis, the whole world faced a great recession for multiple years. Unemployment increased, and public spending reduced massively.
b. Failures of Banks
A number of banks failed during that time. Although respective governments tried their best to save those banks, things didn’t go well in some cases.
c. Strict Regulations
Since then, every government made financial rules tighter.
The world never becomes the same after that great crisis. We hope we learn some of the valid points from that crash and are not going to repeat them in the future.