The Reasons Surrounding the Global Financial Crises Essay

The Reasons Surrounding the Global Financial Crises - Essay Example The essay "The Reasons Surrounding the Global Financial Crises" talks about the Great Depression which occurred in 1930 and was triggered off by the sharp and unprecedented decline in the American stock exchange, the Americans wrapped themselves up around Hoover blankets they had no jobs and the unemployment rate went completely out of control. The recent economic meltdown gave rise to a plethora of economic problems; it was triggered off by the subprime crisis. This paper will shed more light on the subprime crisis. Barrack Obama had to issue a bailout package to save the economy of America, earlier the credit rating of America was triple A but after the recession, it became double A which means America is less likely to pay its debt than earlier. Such news often sends panic waves across the world. The financial crisis triggered off because of the subprime crisis, subprime refers to excessive borrowing and the inability to pay back the debt. â€Å"Several times recently, Treasury Secretary Paulson has claimed that the "root cause" of the current financial crisis is "the housing correction." (Root Cause of the Financial Crisis) The people in the US took loans from banks and other major financial institutions and invested that money into the housing sector but the prices of their houses declined sharply and they were unable to pay their loans back. Institutions like Lehmann Brothers and others went bust because they could not recover their loans and the ever-increasing debt affected them immensely.