The global financial crisis refers to a widespread economic emergency that began in 2007. Beginning with the crash of the United States financial system, the crisis quickly spread worldwide, thanks to the interconnected markets of modern global trading systems. It is still impossible to fully explain the effects of the global financial crisis, as the disaster continues to damage and impede markets worldwide even several years after the initial event.
In the United States, a series of complicated factors lead to the near-simultaneous collapse of the banking industry, financial market, housing system, and other related markets. Though the causes are still greatly argued, this event undoubtedly radiated out into the global market almost immediately. The United States traditionally plays an enormously influential part in global stock trading and financial industries, meaning that the collapse had devastating effects not only within the US but also in many or most of the countries around the world.
The widespread effects of the global financial crisis began to truly take off in late 2007, when food and fuel prices began to skyrocket worldwide. Even factors that may seem minor, such as a rise in fertilizer prices, began to damage the food importation and crop industries in developing nations around the world. As the US financial crisis deepened throughout 2008, banks and financial organizations tried to reduce spending, particularly in foreign investments. This drawback intensified the global problem, as many economies relied heavily on American foreign investing for survival.
While the economic meltdown of America was a tremendous factor, the crisis might have been more contained if not for the strong interconnected workings of the global trade market. While poor and developing nations suffered from the loss of American investments, wealthy countries also were worn down by the loss of such an influential trading partner. As the wealthy countries began to feel the effects, they too pulled back on foreign investing to protect at-home assets, leading to further troubles for the developing world.
Across the world, the global financial crisis caused large-scale drops in production, trade, and capital. Unemployment surged in many areas, while consumer prices on many basic necessities such as food and fuel continued to rise. Poverty and starvation rates increased, while even in wealthy countries recovery and growth remained sluggish.
The full effects of the global financial crisis have not yet been fully explained or addressed. More confusingly, though the timeline of the related crashes can be chronicled, the cause of the whole event is hotly debated among economists, financial professionals, and politicians. Without a complete and comprehensive understanding of the factors that caused the global financial crisis, some experts feel that the world remains extremely vulnerable to another such catastrophe.