The failure of US financial firm Lehman Brothers in September 2008 and the near failure of many other firms triggered a panic selling spree in global markets, especially for equities (stocks) and commodities. This was a result of the collapse in value of subprime mortgages and the resulting debt losses for banks and investment funds, as well as growing concerns about the economic health of the world economy.
Governments responded by increasing spending to stimulate demand and employment; guaranteeing deposits and bank bonds; purchasing ownership stakes in financial firms; and taking a variety of other steps to restore confidence and liquidity. This prevented a global depression, but many economies slowed sharply and suffered much longer recovery times than would have been the case in a slowdown that was not associated with a financial crisis.
Global market crash
As the COVID-19 pandemic continues, the risk of a global stock market crash is rising. Some experts have warned that the world’s current stock market bubble is focused on artificial intelligence companies and could be about to burst. Others have pointed to the deteriorating state of many governments’ finances as another reason for concern.
In fact, a review of 19 major periods of instability by stock market index from 1901 to 2021 suggests that the current volatility due to the coronavirus pandemic is exceptional even by historical standards. It is higher than the Great Depression, the Great Financial Crisis (GFC), and even the Cuban Missile crisis and a few recessions from the late 1800s and early 1900s.
About the Author
