Question

Why do you believe the financial Crisis of 2008 took place? Could happen again or are all of the regulatory safeguards in place preventing any future debacles from occurring? Is Wall Street merely a bubble pop away from our next financial disaster?

Answer 1

The financial crisis of 2008 was severe and it caused a massive fall in output and employment. Causes of financial crisis:

• Financial firms lend out excessively to such borrowers who had bad credit histories. So these borrowers defaulted on loans. So many financial firms failed.
• Financial firms did not have a sufficient level of liquidity.
• Financial regulations were relaxed and financial firms took a high level of risk.
• Majority of loans were given for unproductive activities.

Economic and financial systems across the world have become complex and these are affected by the multiple factors and incidents. Thus, now it is difficult to correctly predict the next financial crisis. Every time we face distinct types of the economic or financial crisis and underlying factors are also distinct. thus, it can not be said with surety that the next crisis would be associated with Wall street or not.