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The Great Recession
The Great Recession is a prime example of what lack of financial literacy and regulation in a population can lead to. 8 millions Americans were left unemployed, 4 million homes were foreclosed upon, and 2.5 millions businesses were shattered.
A Simplified Timeline
1
Banks and Americans were overly comfortable taking risks, based on an ill-informed notion that the housing market would eternally expand. This created a bubble.
2
During the early 2000s the mortgage process was very relaxed (some people even put down fake names to take out mortgages), so many Americans rushed to buy homes.
3
Many bought these homes with armed rates, so at first Americans could afford the rates, but when the interest rates shot up around 2008, Americans could no longer afford the mortgage.
4
Everyone began selling homes at the same times, but no one was buying so the market essentially froze. Banks had taken on too much risk and were left without any collateral.
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