(Photo by Ralph Orlowski/Getty Images) Was the 2008 financial crisis predicted?Ī number of economists claim to have predicted or anticipated the 2008 crisis.īack in 2003, as editor of The Real World Economic Outlook, the UK-based author and economist Ann Pettifor predicted an Anglo-American debt-deflationary crisis. “When the crisis hit, the European Central Bank refused to reschedule or mutualise debt and instead offered a rescue package – on the condition that the stricken nations pursued policies of austerity.”Ī huge Euro logo stands in front of the headquarters of the European Central Bank (ECB) in Frankfurt, Germany, 9 April 2009. “Here, another crisis – one of sovereign debt – arose from the flawed design of the eurozone this allowed countries such as Greece to borrow on similar terms to Germany in the confidence that the eurozone would bail out the debtors. “The crash first struck the banking and financial system of the United States, with spill-overs into Europe,” Daunton explains. ‘Show me the money!’ A brief history of American spending power.
“Excessive financial liberalisation from the late 20th century, accompanied by a reduction in regulation, was underpinned by confidence that markets are efficient,” says Martin Daunton, emeritus professor of economic history at the University of Cambridge. The banking sectors of the USA and the UK came very close to collapse and had to be rescued by state intervention.” Property prices now started to fall, leading to a collapse in the values of the assets held by many financial institutions. “This development squeezed borrowers, many of whom struggled to repay mortgages. (Photo by Christopher Furlong/Getty Images) This was caused by rising energy prices on global markets, leading to an increase in the rate of global inflation.Ī row of ‘For sale’ and ‘To let’ signs stand outside a housing development in Salford, Greater Manchester, 26 November 2008. But the boom was ultimately unsustainable because, from around 2005, the gap between incomes and debt began to widen. “There was borrowing on a huge scale to finance what appeared to be a one-way bet on rising property prices. The immediate trigger was a combination of speculative activity in the financial markets, focusing particularly on property transactions – especially in the USA and western Europe – and the availability of cheap credit, says Scott Newton, emeritus professor of modern British and international history at the University of Cardiff. The 2008 financial crash had long roots but it wasn’t until September 2008 that its effects became apparent to the world. “Lehmans, one of the oldest, richest, most powerful investment banks in the world, was not too big to fail,” says the Telegraph. The then-president George W Bush announced that there would be no bail-out. This is generally considered to be the day the economic crisis began in earnest. On 15 September 2008, Lehman Brothers filed for bankruptcy. (Photo by Mario Tama/Getty Images) When did it begin? The Lehman Brothers’ name is illuminated at the headquarters of Lehman Brothers Holdings Inc.
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