The 2008 Financial Crisis Explained
Past and present
The financial crisis of 2008 shook the global economy. It has been ten years since there was a financial crisis, which makes people wonder what has changed and, more importantly, how this type of economic crisis can be avoided in the future.
As a result of a subprime mortgage crisis, the world financial crisis and recession spread to a large scale. The massive bailouts and financial crisis that followed are now causing many people to question the stability and transparency of the global banking systems that they once trusted.
What happened during the financial crisis?
The 2008 financial crisis was the worst economic disaster since the Great Depression. It was devastating to the world economy. The result of this was what is referred to as the Great Recession, which was marked by sharp drops in real estate prices, as well as sharp increases in unemployment. The repercussions of this crisis were profound, and continue to exert an influence on the financial system today.
It is estimated that over eight million people have lost their jobs in the U.S., over 2.5 million businesses have been destroyed, and there have been around four million foreclosures in less than two years. People are losing faith in the system due to all types of issues, including food insecurity and income inequality.
After the recession officially ended in 2009, many people in the United States, especially, continued to suffer long after the end of the recession. In 2009, the unemployment rate was over 10% and has only been able to recover to pre-crisis levels since 2016.
What caused the Great Recession?
Numerous factors were responsible for the cause. An impending "perfect storm" brews, and once it reaches its breaking point, a financial crisis occurs. Financial institutions made large number of loans at high-risk (mostly mortgages), which led to a massive bailout of the financial sector financed by the taxpayer.
In 2008, the true cause of the financial crisis was highly complex. But it was America's housing market that kicked off a chain reaction that eventually exposed the flaws in the financial system. the Lehman Brothers firm filed for bankruptcy, causing the economy of the United States and Europe to suffer a crippling effect. the episode acted as a wake-up call to the public about the banks' potential problem areas. Furthermore, it caused a deal of disruptions across the globe, mainly because of the interconnectedness between global economies.
Why does it matter today?
Although a decade has passed since the financial crisis, concerns remain. Global economic recovery has been somewhat slow in comparison with historical standards due to the effects of this recession. Despite low default rates today, high-risk loans are once again offered; however, things could change very quickly.
Despite the fact that regulators assert that the global financial system has undergone significant changes since 2008, safety measures have also drastically improved. Many believe that we are living in a stronger financial system today than we were a decade ago as a result of this.
However, a lot of people are still wondering if this type of economic crisis will happen again in the near future. The answer is that anything can happen. In spite of all the changes that have been implemented and the new rules that have been enforced, many fundamental problems persist.
As a matter of fact, the 2008 financial crisis reminds us of the importance of policy. Regulations, politicians, and policymakers made decisions years prior that led to the events of 2008. There are a number of factors that contribute to the Great Recession's continued relevance, ranging from poorly controlled regulatory bodies to the impact of corporate culture.
The development of Bitcoin and other cryptocurrencies
There was a rise in financial crisis in 2008 that highlighted some of the risks associated with the traditional banking system, but also the year when Bitcoin was created - in other words, the year when the first cryptocurrency was created.
Bitcoin and other types of cryptocurrencies are decentralized, which means that they are not subject to the control of a single government or central bank like fiat currencies, such as the US dollar or British pound. In place of this, new coins are instead created according to a predefined set of rules (protocol).
As a result of the Bitcoin protocol and the underlying Proof of Work consensus algorithm, new cryptocurrency units are issued in a regular schedule in accordance with the Bitcoin protocol. Specifically, the process of mining is responsible for the creation of a new coin each year. By verifying and validating transactions, the miners not only introduce new coins into the system, but they also ensure that it is secure by protecting the network.
The protocol also establishes a limit on the number of bitcoins that will ever exist in the world, which guarantees that only a total of 21 million Bitcoins will be ever created. Thus, as far as the current and future supply of bitcoins are concerned, there are no surprises. The Bitcoin source code is open-source as well, which means that anyone can not only view and examine it, but also contribute to its development and actively participate in it.