The financial crisis of 2008 revealed weaknesses in the system from "summary" of The Economics Book by DK
The global financial crisis of 2008 was a watershed moment that shook the foundations of the economic system. It exposed deep-seated weaknesses that had been festering beneath the surface for years, ultimately leading to a collapse of unprecedented proportions. The crisis unfolded with alarming speed, catching many by surprise and leaving a trail of devastation in its wake. One of the key factors that contributed to the crisis was the proliferation of complex financial instruments that few people truly understood. These instruments, such as mortgage-backed securities and credit default swaps, were designed to spread risk and increase profits, but instead they created a tangled web of interconnected liabilities that proved impossible to unravel when the market turned sour. This lack of transparency and accountability exacerbated the crisis, making it difficult for regulators and investors to assess the true extent of the risks involved. Another factor that played a significant role in the crisis was the lax regulatory environment that had developed in the years leading up to 2008. Financial institutions took advantage of loopholes and lax oversight to engage in risky behavior that ultimately proved unsustainable. The lack of regulatory scrutiny ...
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