Bank failure and total paralysis of the world economy: the 2008 crisis in the United States and how it affected Argentina

After the attack on the Twin Towers, The US government opted for a series of economic measuresamong which the deregulation of markets, the expansion of credit and the reduction of taxes and interests stood out.

Besides, disproportionate mortgages prevailed compared to the clients’ ability to pay. In any case, the present was prosperous for Lehman Brothers, an investment bank that recorded record profits between 2005 and 2007.

What the 2008 financial crisis in the United States was about

However, Home prices within the real estate market rosemillions of people had to stop paying their mortgages and banks lost confidence and gained liquidity problems.

From this, the fall began. First, the bank’s near bankruptcy Bear Sterns caused it to be bought in parts by JP Morgan Chase, with the support of the Federal Reserve, which began a game of tug-of-war between buyers who gave their best offer for Lehman and other investors who were betting on its fall..

It was negotiated first with a South Korean bank and then with Bank of America and Barclays. A week earlier, the United States had nationalized other mortgage market bigwigs, Fannie Mae and Freddie Macwhich guaranteed more than 5 billion dollars of loans.

Wall Street recovered.- The next day after the announcement of the FED’s monetary injection, the Dow Jones rose. Thus, on November 4, it returned to the level it had before the fall of Lehman Brothers in 2008, the event that unleashed the global crisis.

Wall Street recovered.- The next day after the announcement of the FED’s monetary injection, the Dow Jones rose. Thus, on November 4, it returned to the level it had before the fall of Lehman Brothers in 2008, the event that unleashed the global crisis.

Finally, on September 15, 2008and after no entity could face the liquidity problems that the bank caused, Lehman Brothers officially declared bankruptcy. In times of speculation and collapse of the financial system, The stock indices plummeted, the bank left a debt of 691,000 million dollars and 25,000 employees on the street. This crisis was considered the worst since the Great Depression in 1929.

The solution became interest rate drops and a public debt purchase program to alleviate the costs that the population had to pay, as well as transmit confidence to the financial system. Due to the injection of liquidity to revive the economy, global public debt grew noticeablyand the market managed to stabilize in 2010, although it had repercussions until 2015.

How the 2008 crisis affected Argentina

Argentinafor its part, was the fifth fastest growing economy among the Group of 20. Only behind China (+8.5), India (+5.6), Indonesia (+4.5) and Australia (+2.7%), it implemented greater state intervention, an increase in public spending and the maintenance of both the commercial and fiscal surplus.