The Financial Crisis

Financial crisis refers to the crisis in financial asset or institutions or financial market. The specific expression is the plummet of financial asset price or the bankruptcy of financial organization or the stock market crash.The financial crisis can be divided into currency crisis, debt crisis and banking crisis. In recent years, the trend of financial crisis is the hybrid type.


The influence of financial crisis is far-reaching. Due to the appearance of financial crisis, the price of monetary devalued, the economic aggregate and the scale of economy curtail. Then a mass of enterprises went into liquidation and lots of people lose their job. Sometimes the financial crisis bring the social instability and political change.


Recent years ,the most serious one is the financial crisis in 2008. The powder hose of this crisis is the US subprime mortgage crisis. In the August of 2007, the fifth biggest investment bank Bear Stearns declared bankruptcy, marked the erupt of subprime crisis. And the “two house crisis” means the US subprime crisis went to a new stage. In September of 2008, with the bankruptcy of Lehman Brothers and the financial distress in AIG(American International Group Inc), the full-blown panic erupted. After the Lehman Brother filed for bankruptcy, the US financial crisis moves at a rate that exceeds financiers’ expectation. No more than two weeks the crisis extends to the Europe. At the same time the European powers can not trust each other and blamed each other made the market sank in an extremely panicked. Because of the global financial market is have close connection, so the US subprime cause the financial work up to the world. The global financial market fall into an unprecedented crisis. In my next blog, I will talk about the reasons of financial crisis in UK in 2008.