The 2008 financial crisis, also known as the Great Recession, was a disastrous event that changed the global economic landscape. The stock market crashed between late 2007 and 2009, wiping out about $8 trillion in value. The unemployment rate also increased, reaching 10% in October 2009. Also, Americans lost $9.8 trillion in wealth, and their retirement plans vanished as their home values crashed (Tatliyer, 2017). The global economic growth lost more than $2 trillion due to the Great Recession. The key driver of the crisis was banks and mortgage lenders increasing their predatory lending practices in the years leading up to the recession. Subprime mortgages for low-income people and poor credit records became rampant (Levy, 2022). To understand the financial crisis, I interviewed my aunt, who experienced it from start to end.
The Great Recession definitely brought a lot of dire consequences to people. My aunt remembers that period well because she worked for Lehman Brothers, which laid off many workers. My aunt lost her job in the process. The company had significant holdings in risky mortgages and other security types, which exposed it to the economic crisis. The Lehman Brothers faced massive losses as the investments were degrading in value due to the crisis. To preserve its bottom line, the company had to reduce the workforce. It later collapsed in September 2008. The layoff would take a turn on my aunt’s life as she was the sole provider to my three cousins, as my uncle had passed on while in the army. The impact began affecting her upon losing her job and increasing the prices of commodities like food and basic amenities like housing.
The spending habits had to ultimately change for the better since she was left relying on her little savings. The marginal propensity to consume changed as she had little non-disposable income. She had to change her spending habits by tightening her budget and reducing non-essential expenses. For instance, my aunt had to cut back on luxuries like going on vacations or engaging in costly hobbies like yachting and skydiving, which she loved a lot. Also, household expenses like grocery shopping have now been reduced, and she opted for cheaper products. The cost of gas was also prohibitive, and people opted for public transportation or cycling.
My aunt remembers the news reports that showed concern in the media about the forthcoming economic crisis. She remembers some of the events reportedly leading to a financial crisis. One of the events was when lenders would offer loans to risky borrowers who had a low chance of paying back. Besides, homeowners were getting mortgages without adequate income to sustain the homes. Homeowners defaulted on their loans and could not pay the monthly payments. Reselling homes was also challenging because home prices were falling, and foreclosures rapidly increased. She worked at major financial institutions like Bear Stearns, AIG, Merril Lynch, Citigroup, and Lehman Brothers, where she was employed, among others. Beyond the news reports, my aunt remembers how families struggled to make ends meet. She gave me an example of a next-door neighbor who committed suicide after losing everything in the stock market and later being evicted.
To sum up, the 2008 Great Recession was a tough time for the global economy. From the first-hand accounts I have heard from my aunt, the financial crisis had many unprecedented consequences that sent shockwaves across the United States. The reckless lending of major financial institutions was the cause of the failed stock markets and the housing crisis. The crisis caused economic downturns, which prompted a reevaluation of the economic parameters so such a crisis never happens again.
Works Cited
Tatlıyer, Mevlüt. “The 2008–2009 financial crisis in historical context.” Global Financial Crisis and Its Ramifications on Capital Markets: Opportunities and Threats in Volatile Economic Conditions (2017): 3-17. https://link.springer.com/chapter/10.1007/978-3-319- 47021-4_1
Levy, Daniel, Tamir Mayer, and Alon Raviv. “Economists in the 2008 financial crisis: Slow to see, fast to act.” Journal of Financial Stability 60 (2022): 100986. https://www.sciencedirect.com/science/article/abs/pii/S1572308922000158
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