The 2008 Financial Crisis

2008 CE — Global, Global

Today: The United States, then the world

A towering pyramid of mortgage debt, built on the belief that house prices could only rise and sliced into securities almost no one understood, collapsed and nearly took the global banking system down with it. Governments spent trillions to prevent a second Great Depression. Almost no one in a position to stop it had believed house prices could fall nationwide at the same time.

Worth knowing: The crisis was worsened by financial products so complex that even the bankers selling them didn't grasp the risk — and the crash erased an estimated $2 trillion from the global economy in a matter of months.

Pattern: Debt / credit cycle — Credit expands faster than the real capacity to repay; the gap is eventually closed by crisis, default, relief, or reset.

Entry 238 of 240 in Precedent, a walk through the whole human story in order.