2008 Financial Crisis 2008 Research Paper
Financial Crisis of 2008
Before the financial crisis of 2008, houses had always been rising in value so why would this all of a sudden change? Investors had found a great way to make money in the mortgage market and it was not just benefiting them, it was benefiting everyone. Exploring the lack of regulation in the market and also human behavior, I am going to break down what caused the financial crisis of 2008. The two videos, “Crisis of Credit,” and “Mind Over Money,” are my main sources of information.
Investors with a lot of money would buy treasury bills from the Federal Reserve because it was a safe investment. Alan Greenspan who was the Chairman of the Federal Reserve lowered the interest rates on the treasury bills to 1 percent …show more content…
The Dutch economy experienced their own financial crisis in the 1630’s. In Holland, during a three-year period the price of a tulip bulb was about the same as the price of a house. It was said that around half of the money in the Dutch economy was caught up in trades dealing with tulip bulbs (Mind). People kept buying tulip bulbs at extremely high prices because they thought they would be able to turn around and resell them for more money. When the most expensive tulip failed to sell, everyone who had invested into tulip bulbs panicked. The prices dropped drastically and everyone tried to sell but nobody would buy because the tulips had become worthless. Many people went bankrupt and the Dutch economy took an entire generation to recover. This parallels the financial crisis of 2008 very well. Greed and emotion was driving the Dutch citizens to buy tulip bulbs for more than what they were worth with the mindset that they would just resell them when the price went up. We need to learn from past mistakes and have more regulation to prevent these things from happening. This example and the financial crisis show why there needs to be regulation in the market. It might cut down on some opportunities to make a lot of money but it would saved these economies from crashing the way they
Before the financial crisis of 2008, houses had always been rising in value so why would this all of a sudden change? Investors had found a great way to make money in the mortgage market and it was not just benefiting them, it was benefiting everyone. Exploring the lack of regulation in the market and also human behavior, I am going to break down what caused the financial crisis of 2008. The two videos, “Crisis of Credit,” and “Mind Over Money,” are my main sources of information.
Investors with a lot of money would buy treasury bills from the Federal Reserve because it was a safe investment. Alan Greenspan who was the Chairman of the Federal Reserve lowered the interest rates on the treasury bills to 1 percent …show more content…
The Dutch economy experienced their own financial crisis in the 1630’s. In Holland, during a three-year period the price of a tulip bulb was about the same as the price of a house. It was said that around half of the money in the Dutch economy was caught up in trades dealing with tulip bulbs (Mind). People kept buying tulip bulbs at extremely high prices because they thought they would be able to turn around and resell them for more money. When the most expensive tulip failed to sell, everyone who had invested into tulip bulbs panicked. The prices dropped drastically and everyone tried to sell but nobody would buy because the tulips had become worthless. Many people went bankrupt and the Dutch economy took an entire generation to recover. This parallels the financial crisis of 2008 very well. Greed and emotion was driving the Dutch citizens to buy tulip bulbs for more than what they were worth with the mindset that they would just resell them when the price went up. We need to learn from past mistakes and have more regulation to prevent these things from happening. This example and the financial crisis show why there needs to be regulation in the market. It might cut down on some opportunities to make a lot of money but it would saved these economies from crashing the way they