FundRobot » Global Fund » How to explain the 2008-09 Global Financial Crisis to a 10 year old?

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Default explain the 2008-09 global financial crisis to a 10 year old


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Default explain the 2008-09 global financial crisis to a 10 year old

What 10 year old is interested in financial history?

The "Second Great Contraction"in the U.S. was the result of a confluence of factors: bad loans made by banks, ratings agencies falling down on the job, lax regulatory policies, misguided government incentives that encouraged banks to be reckless in their lending, and even monetary policy that kept interest rates too low for too long.

The Second Great Contraction, the worst economic downturn since the 1930s, was unusual because it stemmed from an easing of credit standards and an abundance of financing that had fueled the prior expansion. This fuel also helped create imbalances -- an overextension of mortgage financing and capital market financial intermediation. A housing collapse and credit shocks, culminating in a financial crisis, hit the economy as these financial practices generated new losses. Home construction plunged, the stock market crashed, commodity prices tumbled, job losses mounted, credit standards tightened, and short-term funding markets seized up.
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