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URLhttps://www.economist.com/schools-brief/2013/09/07/crash-course
Last Crawled2026-04-13 06:10:42 (19 hours ago)
First Indexed2018-05-24 11:17:54 (7 years ago)
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Meta TitleCrash course
Meta DescriptionThe effects of the financial crisis are still being felt, five years on. This article, the first of a series of five on the lessons of the upheaval, looks at its causes | Schools brief
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Sep 7th 2013 | 9 min read THE collapse of Lehman Brothers, a sprawling global bank, in September 2008 almost brought down the world’s financial system. It took huge taxpayer-financed bail-outs to shore up the industry. Even so, the ensuing credit crunch turned what was already a nasty downturn into the worst recession in 80 years. Massive monetary and fiscal stimulus prevented a buddy-can-you-spare-a-dime depression, but the recovery remains feeble compared with previous post-war upturns. GDP is still below its pre-crisis peak in many rich countries, especially in Europe, where the financial crisis has evolved into the euro crisis. The effects of the crash are still rippling through the world economy: witness the wobbles in financial markets as America’s Federal Reserve prepares to scale back its effort to pep up growth by buying bonds. With half a decade’s hindsight, it is clear the crisis had multiple causes. The most obvious is the financiers themselves—especially the irrationally exuberant Anglo-Saxon sort, who claimed to have found a way to banish risk when in fact they had simply lost track of it. Central bankers and other regulators also bear blame, for it was they who tolerated this folly. The macroeconomic backdrop was important, too. The “Great Moderation”—years of low inflation and stable growth—fostered complacency and risk-taking. A “savings glut” in Asia pushed down global interest rates. Some research also implicates European banks, which borrowed greedily in American money markets before the crisis and used the funds to buy dodgy securities. All these factors came together to foster a surge of debt in what seemed to have become a less risky world.
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[Cartoons & games](https://www.economist.com/topics/games) ### undefined undefined *** Subscribe to The Economist Unlock unlimited access to all our award-winning journalism, subscriber-only podcasts and newsletters Subscribe to The Economist Unlock unlimited access to all our award-winning journalism, subscriber-only podcasts and newsletters [Subscribe](https://www.economist.com/subscribe) *** - [Manage account](https://www.economist.com/api/my-account) - [Gift subscriptions](https://subscribenow.economist.com/gift) - [Log out](https://www.economist.com/api/auth/logout) - [Manage account](https://www.economist.com/api/my-account) - [Gift subscriptions](https://subscribenow.economist.com/gift) - [Log out](https://www.economist.com/api/auth/logout) [Schools brief](https://www.economist.com/schools-brief) \| The origins of the financial crisis # Crash course ## The effects of the financial crisis are still being felt, five years on. This article, the first of a series of five on the lessons of the upheaval, looks at its causes Share ![](https://marber-cdn.economist.com/foundations/latest/images/image/image-placeholder.svg) Sep 7th 2013 \|9 min read THE collapse of Lehman Brothers, a sprawling global bank, in September 2008 almost brought down the world’s financial system. It took huge taxpayer-financed bail-outs to shore up the industry. Even so, the ensuing credit crunch turned what was already a nasty downturn into the worst recession in 80 years. Massive monetary and fiscal stimulus prevented a buddy-can-you-spare-a-dime depression, but the recovery remains feeble compared with previous post-war upturns. GDP is still below its pre-crisis peak in many rich countries, especially in Europe, where the financial crisis has evolved into the euro crisis. The effects of the crash are still rippling through the world economy: witness the wobbles in financial markets as America’s Federal Reserve prepares to scale back its effort to pep up growth by buying bonds. With half a decade’s hindsight, it is clear the crisis had multiple causes. The most obvious is the financiers themselves—especially the irrationally exuberant Anglo-Saxon sort, who claimed to have found a way to banish risk when in fact they had simply lost track of it. Central bankers and other regulators also bear blame, for it was they who tolerated this folly. The macroeconomic backdrop was important, too. The “Great Moderation”—years of low inflation and stable growth—fostered complacency and risk-taking. A “savings glut” in Asia pushed down global interest rates. Some research also implicates European banks, which borrowed greedily in American money markets before the crisis and used the funds to buy dodgy securities. All these factors came together to foster a surge of debt in what seemed to have become a less risky world. ## Get unlimited digital access to *The Economist* ### Includes all our journalism, newsletters, exclusive video debates and podcasts INTRODUCTORY OFFER #### Annual £16.28/month Save £83.70\* Billed as £195.30 for first year. Your subscription to *The Economist* auto-renews at £279 annually \*Savings based on renewal price. 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Readable Markdown
![](https://marber-cdn.economist.com/foundations/latest/images/image/image-placeholder.svg) Sep 7th 2013\|9 min read THE collapse of Lehman Brothers, a sprawling global bank, in September 2008 almost brought down the world’s financial system. It took huge taxpayer-financed bail-outs to shore up the industry. Even so, the ensuing credit crunch turned what was already a nasty downturn into the worst recession in 80 years. Massive monetary and fiscal stimulus prevented a buddy-can-you-spare-a-dime depression, but the recovery remains feeble compared with previous post-war upturns. GDP is still below its pre-crisis peak in many rich countries, especially in Europe, where the financial crisis has evolved into the euro crisis. The effects of the crash are still rippling through the world economy: witness the wobbles in financial markets as America’s Federal Reserve prepares to scale back its effort to pep up growth by buying bonds. With half a decade’s hindsight, it is clear the crisis had multiple causes. The most obvious is the financiers themselves—especially the irrationally exuberant Anglo-Saxon sort, who claimed to have found a way to banish risk when in fact they had simply lost track of it. Central bankers and other regulators also bear blame, for it was they who tolerated this folly. The macroeconomic backdrop was important, too. The “Great Moderation”—years of low inflation and stable growth—fostered complacency and risk-taking. A “savings glut” in Asia pushed down global interest rates. Some research also implicates European banks, which borrowed greedily in American money markets before the crisis and used the funds to buy dodgy securities. All these factors came together to foster a surge of debt in what seemed to have become a less risky world. ![](https://marber-cdn.economist.com/foundations/latest/images/image/image-placeholder.svg) *** ***
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