In my previous blog post I discussed what the 2008 financial crisis was and how it brought about ‘The Great Recession’, I also discussed the beginning of the financial crisis and the collapse of the Lehmann brothers firm. I also discussed what I personally believe was the cause for the crisis and The Great Recession.
In this blog, I intend to examine the effect of the 2008 Financial Crisis and The Great Recession on numerous countries around the world, specifically the US and the UK. In the UK financial institutions are heavily interlinked with each other, meaning that when one collapses it has the potential to bring the rest with it, this is exactly what happened when the banking sector collapsed. The 2008 Recession brought about severely hard times for the UK people and the economy, Richards (2020) notes that the financial crisis was highlighted by “cutbacks in housing and retail sales, and widespread redundancies which sent the unemployment rate sky-rocketing”. This was highlighted by the closure of businesses such as Woolworths and Zavvi. As a result of this, house prices fell and the stock market crashed to levels unseen before. This highlights just how badly the UK were affected by the crisis.
Now lets have a look at the US, the affect to the US economy was very similar to the UK, however the US economy was affected much more severely. Swagel (2010) states that “the financial crisis cost the U.S. an estimated $648 billion due to slower economic growth”. As well as this, millions of Americans lost their homes to mortgage foreclosures, and by the summer of 2010 the jobless rate had risen to almost ten per cent (Cassidy, 2018). From this it is clear to see that the US were very badly affected by the crisis and they had to come up with a way out of it very quickly. In order to help stabilise their economy, the US established the Emergency Economic Stabilisation Act. Davis (2021) states that this act “authorised the U.S. Department of the Treasury to buy up to $700 billion in toxic assets from companies, which could then replenish their balance sheets with safer assets”. This bailout as such helped to stabilise the US economy to a degree and was a stepping-stone for the Obama administration in their road out of economic turmoil.
As discussed above, the whole world was affected by the crisis, it was a chain reaction among countries, I discussed how the UK and the US specifically were affected, however I could have looked at any country and the results I would find would be very similar if not the same. The financial crisis was the worst economic disaster to hit the world economy and effects of it are still present today.
In my next blog I will look into the recovery of the economy from the disaster and I will also discuss whether I believe the current COVID 19 pandemic could trigger another financial crisis in the near future. Thank you all for reading and again any feedback is greatly appreciated.
Cassidy, J., 2018. The Real Cost of the 2008 Financial Crisis. The New Yorker, Available at: https://www.newyorker.com/magazine/2018/09/17/the-real-cost-of-the-2008-financial-crisis
[Accessed 12 March 2021].
Davis, M., 2021. US Government Financial Bailouts. Investopedia. Available at: https://www.investopedia.com/articles/economics/08/government-financial-bailout.asp
[Accessed 12 March 2021].
Swagel, P., 2010. The Impact of the September 2008 Economic Collapse. Pewtrusts.org. Available at: https://www.pewtrusts.org/en/research-and-analysis/reports/2010/04/28/the-impact-of-the-september-2008-economic-collapse
[Accessed 12 March 2021].
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