The global financial crisis of 2008/09 was a result of the credit cruch as the financial market

which had been heavily deregulated since the 1980s by the US government collapsed due to a
lack of investor confidence. By 2008, the crisis had worsened as stock markets around the globe
crashed and became highly volatile. The main factors leading upto the financial crisis were the
deregulation of the finiancial sector, introduction of derivatives, subprimes loans and the housing
bubble. All of these meant that banks were able to make too much money, too quickly, and used
it to push up house prices and speculate on financial markets.

Eventually, due to the housing bubble, house buys were forced to borrow large loans and forced
to pay interest on the greater amount of money that banks lended. With debt rising quicker than
incomes, eventually many people were unable to keep up with repayments. As a result bank
loans were not repayed and banks found themselves in the danger of bankruptcy.

Deregulation:

Derivatives:

Sub-prime loans:

Housing bubble:

Very little of the trillion pounds that banks created between 2000-2007 went to
businesses outside of the financial sector:

Around 31% went to residential property, which pushed up house prices faster
than wages.
A further 20% went into commercial real estate (office buildings and other
business property)
Around 32% went to the financial sector, and the same financial markets that
eventually imploded during the financial crisis.
But just 8% of all the money that banks created in this time went
tobusinesses outside the financial sector.
 A further 8% went into credit cards and personal loans.