Macroeconomics for investors — the 2008 recession

The 2008 recession, often referred to as the Global Financial Crisis, was a profound economic contraction that stemmed from a convergence of factors in the financial and housing sectors. It was characterized by the bursting of the U.S. housing bubble, triggered by excessive subprime mortgage lending and subsequent foreclosures. This set off a chain reaction of failures in financial institutions due to their exposure to risky mortgage-backed securities, leading to a widespread credit freeze and liquidity crisis. The resulting sharp decline in consumer spending, business investments, and international trade contributed to a severe global recession. Governments and central banks worldwide responded with unconventional monetary policies, massive fiscal stimulus, and financial institution rescues to stabilize economies and restore growth. The 2008 recession highlighted vulnerabilities in financial systems, the significance of regulatory oversight, and the interconnectedness of modern economies.

The 2008 recession opens a can of questions. What had happened? Were there any early signs? What was the root cause? Can I use the AD/AS economic model to explain it? What were the Fed’s policies? And most of all, what can we learn from the 2008 recession? What financial wisdom can we teach to the next generation? Lets me introduce the 2008 recession in a chronological…