By Tara Clarke, Associate Editor, Money Morning • @TaraKateClarke • June 26, 2015. Address: 1125 N Charles St. | Baltimore, MD, 21201 | USA | Phone: 888.384.8339 | Disclaimer | Sitemap | Privacy Policy | Whitelist Us | Do Not Sell My Info, By submitting your email address you will receive a free subscription to, 2008 Stock Market Crash Causes and Aftermath. Why did the banks give sub prime loans? The Euro crisis was seen in the near-collapse of the Greek economy as well as the different austerity measures that the Greek government put into place to be financially able to pay back debts to other European countries. What government policies lead to this? The developed economies of the world such as the United States, United Kingdom, France, Germany, and Russia fell into a definite recession whereas economies that were still developing such as China and India were growing during this period. Robert Shiller's Home Price Index went from 87.0 to 160.6. Furthermore, Hamilton argues that if oil had not gone up to such a high price the United States' economy would have never been in recession territory - the U.S economy would have continued to grow had oil prices been stable. These 23 Charts Prove That Stocks Are Heading For A Devastating Crash. All maps, graphics, flags, photos and original descriptions © 2020 worldatlas.com, The Largest Companies in the World by Market Cap, The World’s Largest Oil Reserves By Country, Top Cotton Producing Countries In The World. Subprime financial crisis-related events that triggered the top two largest single-day Dow drops also accounted for the fourth, fifth, and tenth largest single-day crashes in Dow history, all occurring in 2008. The 2008 stock market crash is considered by many economists to be the worst global financial crisis since the Great Depression in the 1930's. The paper has three parts. The Beginnings. This time, recession talk fueled the 7.9% decline. Because lenders could pass on the risks of lending to another person, criteria to take out a large mortgage loan became increasingly lax, and many who were financially unable to meet their obligations for a loan were still granted one if not multiple. The high number of new mortgages created many new house buyers and drove prices for housing through the roof. 2020 Crash Pared With 1929 1987 2000 And 2008 2009 Nysearca. In total, 14 billion dollars of wealth were lost during the market crash. The Crash of 1929 . A subprime mortgage is a type of home loan given to individuals with poor credit ratings (usually 600 and below). In the United States, the Emergency Economic Stabilization Act was swiftly passed through government, and this act allowed the government to purchase up to $700 billion of assets from banks that had been deemed unstable or toxic to stabilize the economy. Starting in 2007, the United States housing market began to show signs of toxicity with many lenders having given out too many mortgages to clients who were unable to meet their financial obligations to the lender and were consequently defaulting on their mortgages. Meanwhile, U.S. households became increasingly indebted. Or to contact Money Morning Customer Service, click here. The low interest rates set by the Federal Reserve in the 1990s and 2000s provided further incentive for home buying. – Gordon Gekko, "Wall Street II.". The index was at 105.7 by 2009. Was it a political root cause? Protected by copyright of the United States and international treaties. One week in October (the 6th until the 10th) saw the United States stock exchange lose about 18% of its value and the London stock exchange losing 21% of its value. In other words, people were given access to loans they could not afford: predatory loans. These factors fueled the run-up in housing prices: You see, building up to the start of the collapse in 2007, the subprime mortgage industry thrived. By Justin Findlay on September 27 2017 in Economics. After housing values skyrocketed, many thought that they could take out a large loan against the equity of the inflated value of their house. It wiped out more than $2 trillion of Americans' retirement savings. The effects will still be felt by the world economy for years to come. E0,E2 ABSTRACT This paper argues that the stock market crash of 2008, triggered by a collapse in house prices, caused the Great Recession. This act would end up costing every single United States citizen at the time around $2,200 each, which is staggering. “September 2008 wasn’t the bottom. Stock Market Crash 2008 Dates Causes Effects. Banks were heavily invested in stocks, and individual investors borrowed on margin to invest in stocks. 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