← Back to Glossary

(the) financial crisis (2007-2009)

House prices and stocks (and other things) boomed from around 2001-2007. The financial system had accumulated a huge amount of debt, meaning that lots of actors (from individuals to investment funds to banks) had borrowed a ton of money. All the borrowing masked which institutions and investors actually had money – and which had simply borrowed too much money. Once some investments started to lose money, investors started withdrawing their funds. And then more and more investors started withdrawing their money, creating a snowball effect. That led to a dramatic bursting of the bubble. Stocks lost more than 50% of their value and major financial institutions, like Lehman Brothers (a major American investment bank at the time), went bankrupt. At times, it seemed like the world’s financial system might genuinely collapse. In order to stem the crisis, the US Federal Reserve had to enact some “emergency” measures which, essentially, made it impossible for any more banks to go bankrupt (at least under those emergency measures). That calmed everyone down and, eventually, the price of things like stocks and bonds recovered.

Grow your business
with Finimize

Our Partners