The Global Ripple Effect While the United States was the epicenter of the housing bubble, the effects of the 2007 financial instability began to spread globally. Financial Market Volatility and the Subprime Awakening Early 2007 saw the first tremors of what would become a major financial earthquake.
2007 Financial Crisis Origins: Subprime Mortgage Unraveling and Global Impact
Global economic activity in 2007 was characterized by a paradox of prosperity. The United States GDP growth remained positive, though it began to slow toward the end of the year.
Financial institutions aggressively marketed subprime mortgages to borrowers with poor credit histories, packaging these high-risk loans into complex securities sold to investors worldwide. The interbank lending market, essential for daily commerce, froze up as institutions became wary of lending to one another.
2007 Financial Crisis Origins: Subprime Mortgage Details and the Global Ripple Effect
The year ended with the Fed beginning a cycle of rate cuts in September, a move intended to stabilize the financial system but one that would later be criticized for providing the liquidity for the eventual crisis to fully erupt. The subsequent credit crunch plunged the world into the Great Recession, characterized by massive job losses, plunging asset values, and severe government debt crises.
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