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Financial Crisis

Financial Crisis. Week 7 Econ 202. Six Stages of a Financial Crisis. 1. Large decline in an asset’s price 30% in housing 2007-2009 (not since GD) 2. Insolvencies in financial institutions Failure of those holding mortgages/securities 3. Decline in confidence in Fin. Institutions

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Financial Crisis

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  1. Financial Crisis Week 7 Econ 202

  2. Six Stages of a Financial Crisis • 1. Large decline in an asset’s price • 30% in housing 2007-2009 (not since GD) • 2. Insolvencies in financial institutions • Failure of those holding mortgages/securities • 3. Decline in confidence in Fin. Institutions • Pull money out -> fire sale on assets • 4. Credit crunch • 5. Economic downturn • 6. Reduced profits -> decline in value of assets -> back to Step 1

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