The Financial Crisis (2008): It is known as the worst economic tragedy since the Great Depression (1929). The American investment bank and Lehman Brothers collapsed because of this crisis. The crisis was the result of many sequential events, each event activating a mechanism that nearly led to the deterioration of the banking system. The roots of this crisis arguably go back to the 1970s, when the Community Development Act was passed. It forced banks to relax lending terms for low-income people, which created a market for subprime mortgages. Say no to plagiarism. Get a tailor-made essay on “Why Violent Video Games Should Not Be Banned”?Get the original essay Before the collapse of Lehman Brothers, the US government refused to bail them out, which created uncertainty in the atmosphere due to counterparty risk that the number of transactions will decrease significantly in the financial markets during the third and fourth quarters of 2008. The working capital deficit began to spread, leading anxious companies to liquidate their stocks, parts and components, and to lay off their staff. Trade finance began to become scarce and corporate purchases declined and international consumer trade began to collapse. Many aggressive measures have been taken by governments and the central bank to stabilize national economies. This is the second phase of the crisis, the stabilization phase which began in the fourth quarter of 2008 and ended at the end of 2009. While interest rates were close to zero and liquidity was put at risk, provision in large quantities to financial market institutions, the central bank the purchase of a series of financial assets and the implementation of large fiscal stimulus plans. Starting in 2010, the third phase was then announced with austerity plans, which involved increased tax cuts and public spending. However, these measures were considered rather controversial, with the majority believing that their implementation was early given that economies had not returned to their pre-crisis growth trajectories. Austerity and structural reforms worked together to increase the growth rate of economies in the long term, which would later lead to higher future tax levels and end doubts about the long-term solvency of governments. Austerity merged with many industrial economies with high savings rates, people were ready to pay off their debts and start rebuilding their financial portfolios. The sharp decline in property sector prices in some jurisdictions and the effects of the acquisition of foreign financial assets whose value had fallen significantly meant that there was a considerable amount of bad debts held by banks. Throughout the process of identifying and writing off bad debts, bank loans for the new project have been miserable. Deleveraging and rebuilding bank balance sheets were the main concerns of austerity during 2010 to 2012, meaning that many major economies had fallen below economic growth projections. Keep in mind: this is just a sample. Get an article preview now from our expert writers.Get a Custom Essay During the third quarter of 2012, austerity was heavily questioned by the International Monetary Fund; it was only in 2013 that several..