The Problem with Banks and the Global Financial Crisis 2008

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In the course of time, banks have become more and more important in the economy. Not only are banks places to store money, but also to make basic investments like term deposits, sign up for a credit card or get a loan. This enables families and businesses to invest for the future.
Bank loans and credit means families don't have to save up before going to college or buying a house and companies can hire more workers and expand themselves for the future. The system of banks, promotes the consumption and therefore improves the economy of the country. However, banks also hold a great risk. The Global Financial Crisis in 2008 was caused by the decline of the bank the “Lehman Brothers Holdings Inc.”, because the costumers could not repay their debt to the bank. The decline of one bank often leads to the decline of other banks, because banks interact with each other by lending and borrowing money. Therefore, when one bank is unable to pay, other banks are also unable to fulfill their duty. This automatically triggers a financial disturbance in corporations and businesses, who depend on the money they borrow from the banks. The disturbance in the financial market is called a financial crisis. Starting from the Great
Depression in 1929, going to the Global Financial Crisis today, it can be observed that financial crisis have two things in common: high unemployment and high indebtedness. Today, the Global
Financial crisis resulted in the loss of people’s savings and homes, leaving them unable to pay back their debt. The global financial crisis has devastating effects worldwide and is still present nowadays. In order to recover the economy, banks and the government have take actions to overcome the financial cris...

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