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Lessons Learned from the 2008 Financial Crisis

The 2008 financial crisis was a major blowback to the global economy, with over 8.8 million jobs lost causing the unemployment rate to skyrocket to 10 percent by October, 2009. The statistics reveal that the crisis left an enormous hole in the material and emotional financial scenery of many around the world.

Some of the major causes of the crisis are the basis of the fundamental lessons learnt from it to ensure that the world never faces a similar occurrence going forward.

The inflamed housing market played a major role in the occurrence of the financial crisis, with banks lending to unscrupulous and unfit borrowers. Today, this market faces more stringent lending policies and with much lower interests rates compared to 2008, future increments are unlikely to cause the collapse of the market.

Back in 2008, there was the notion that the global banks were fail proof, a notion that was proven wrong by the crisis. Today, all banks and other financial institutions ensure to keep healthy, up-to-date records to provide more resilience to the banking system. Although banks have managed to overcome the liquidity crisis, their stocks are yet to recover from their pre-crisis peaks.

Banks used their money to make careless bets that contradict those made with their clients, imminently causing tremendous losses and a pile up of law suits. Today, the legislation limits these banks from making many high risk bets with the client’s finances and against the interests of their clients.

The manner of investment has changed drastically, creating indexed funds of over 40 percent in equity assets that are managed internationally. Exchange Trade Funds (ETF) was developed after the 2008 financial crisis, and it is impossible to gauge their stability in the face of a crisis.

These lessons were agonizing and intense, but with the implemented measures like bank regulation, the financial stability of the global economy is bound to grow stronger.

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