What is Global Economic Collapse?
A global economic collapse is a complex business situation to succeed, since potential consumers tend to reduce their purchases of goods and services until the economic state improves. It is a period of economic difficulties throughout the world experienced by markets and consumers.
In 2008, the world economy faced its most dangerous crisis since the Great Depression of the 1930s. The effects of this economic slowdown had a continuing influence in 2013. It was a great global recession characterized by several systematic imbalances, and was caused by the bursting of the US subprime mortgage crisis UU And the financial crisis of 2007 and 2008.
A financial crisis is often linked to a panic or a run on the banks, in which investors sell the assets or withdraw money from the savings account with the expectation that the values of those assets will decrease if they remain in a financial institution .
Reason of Global Economic Collapse:
The financial crisis happened because banks were able to create too much money, too fast, and they used it to raise house prices and speculate about financial markets.
- The US economy UU I was being driven by a real estate bubble. When it broke, private residential investment was reduced by almost 4% of GDP and the consumption allowed by the housing wealth generated by the bubble also slowed down. This created a gap in annual demand (GDP) of almost $ 1 trillion. the US government UU he was not willing to compensate for the private sector deficit.
- The record level of family debt accumulated in the decades prior to the crisis caused a recession in the balance sheet (similar to debt deflation) when housing prices began to fall in 2006. Consumers began to pay off the debt, which reduces its consumption and slows down the economy. Prolonged period while debt levels are reduced.
- The policies of the US government. UU They encouraged home ownership even for those who could not afford it, which contributed to lax credit regulations, the unsustainable increase in housing prices and indebtedness.