Financial Crisis of America
The financial crisis in the year 2007 happened due to a liquidity deficit in the United States banking system, which resulted in collapse of many financial institutions, government and corporate banks, and decline in stock markets around the world. Housing market suffered a lot due to this crisis, which resulted in several foreclosures, prolonged vacancies and evictions.
According to the economists, the year 2007 crisis is considered as the worst financial crisis since, the Great Depression in the year 1930. This financial crisis in America created a huge impact on many key businesses, significant turn down in economic activity, substantial financial promises incurred by governments, and decrease in consumer wealth expected in trillions of U.S. dollars. Both market based and dictatorial solutions have been executed, but still a considerable threat remain for the world economy in upcoming years (2010-2011).
In the year 2006, the collapse of the housing bubble peaked in United States, which caused several damages to the financial institutions globally and values of securities that tied to real estate pricing to tumble. During the late 2008 and early 2009, investors lost their confidence to invest the money in global market, where security suffered large losses and decrease in credit availability. Economies throughout the world slowed down during this period due to decline in international trade and tightened credits. In this period, credit rating agencies and investors failed to predict accurate pricing risk, which was concerned with mortgage related financial products and that government did not change their authoritarian practices to address 21st century financial markets. Government and central banks reacted with exceptional economic stimulus, fiscal policy development and institutional bailouts.