In the fall of 2008, the credit crunch, which had emerged a little more than a year before, ballooned into Wall Street’s biggest crisis since the Great Depression. As hundreds of billions in mortgage-related investments went bad, mighty investment banks that once ruled high finance have crumbled or reinvented themselves as humdrum commercial banks. The nation’s largest insurance company and largest savings and loan both were seized by the government. The channels of credit, the arteries of the global financial system, have been constricted, cutting off crucial funds to consumers and businesses small and large.
In 2008, a global economic crisis was suggested by several important indicators of economic downturn worldwide. These included high oil prices, which led to both high food prices (due to a dependence of food production on petroleum, as well as using food crop products (ethanol, biodiesel) as an alternative to petroleum) and global inflation; a substantial credit crisis leading to the bankruptcy of large and well established investment banks as well as commercial banks in various nations around the world; increased unemployment; and the possibility of a global recession.
The global financial crisis of 2008 is a major ongoing financial crisis, the worst of its kind since the Great Depression. Beginning with failures of large financial institutions in the United States, it rapidly evolved into a global crisis resulting in a number of European bank failures and declines in various stock indexes, and significant reductions in the market-value of equities (stock) and commodities worldwide. The crisis has led to a liquidity problem and the de-leveraging of financial institutions especially in the United States and Europe, which further accelerated the liqudity crisis.