Financial crisis of 20072010 The financial crisis of 2007present is a crisis triggered by a liquidity crisis in the United States banking

system. It has resulted in the collapse of large financial institutions, the bailout of banks by national governments and downturns in stock markets around the world. In many areas, the housing market has also suffered, resulting in numerous evictions, foreclosures and prolonged vacancies. It is considered by many economists to be the worst financial crisis since the Great Depression of the 1930s.It contributed to the failure of key businesses, declines in consumer wealth estimated in the trillions of U.S. dollars, substantial financial commitments incurred by governments, and a significant decline in economic activity. Many causes have been proposed, with varying weight assigned by experts. Both market-based and regulatory solutions have been implemented or are under consideration, while significant risks remain for the world economy over the 20102011 periods. The collapse of a global housing bubble, which peaked in the U.S. in 2006, caused the values of securities tied to real estate pricing to plummet thereafter, damaging financial institutions globally.Questions regarding bank solvency, declines in credit availability, and damaged investor confidence had an impact on global stock markets, where securities suffered large losses during late 2008 and early 2009. Economies worldwide slowed during this period as credit tightened and international trade declined. Critics argued that credit rating agencies and investors failed to accurately price the risk involved with mortgage-related financial products, and that governments did not adjust their regulatory practices to address 21st century financial markets. Governments and central banks responded with unprecedented fiscal stimulus, monetary policy expansion, and institutional bailouts. Causes of the financial crisis of 20072010 Many factors directly and indirectly caused the ongoing Financial crisis of 2007-2010 (which started with the US subprime mortgage crisis), with experts placing different weights upon particular causes. The complexity and interdependence of many of the causes, as well as competing political, economic and organizational interests, have resulted in a variety of narratives describing the crisis. One category of causes created a vulnerable or fragile financial system, including complex financial securities, a dependence on short-term funding markets, and international trade imbalances. Other causes increased the stress on this fragile system, such as high corporate and consumer debt levels. Still others represent shocks to that system, such as the ongoing foreclosure crisis and the failures of key financial institutions. Regulatory and market-based controls did not effectively protect this system or measure the buildup of risk. Some causes relate to particular markets, such as the stock market or housing market, while others relate to the global economy more broadly. In July 2009, the U.S. announced the members of the Financial Crisis Inquiry Commission to investigate the causes of the crisis. Its report is expected at the end of 2010

The U.S. housing bubble and foreclosures

Between 1997 and 2006, the price of the typical American house increased by 124%. During the two decades ending in 2001, the national median home price ranged from 2.9 to 3.1 times median household income. This ratio rose to 4.0 in 2004, and 4.6 in 2006. This housing bubble resulted in quite a few homeowners refinancing their homes at lower interest rates, or financing consumer spending by taking out second mortgages secured by the price appreciation. By September 2008, average U.S. housing prices had declined by over 20% from their mid-2006 peak. Easy credit, and a belief that house prices would continue to appreciate, had encouraged many

subprime borrowers to obtain adjustable-rate mortgages. These mortgages enticed borrowers with a below market interest rate for some predetermined period, followed by market interest rates for the remainder of the mortgage's term. Borrowers who could not make the higher payments once the initial grace period ended would try to refinance their mortgages. Refinancing became more difficult, once house prices began to decline in many parts of the USA. Borrowers who found themselves unable to escape higher monthly payments by refinancing began to default. During 2007, lenders had begun foreclosure proceedings on nearly 1.3 million properties, a 79% increase over 2006. This increased to 2.3 million in 2008, an 81% increase vs. 2007.As of August 2008, 9.2% of all mortgages outstanding were either delinquent or in foreclosure. The Economist described the issue this way: "No part of the financial crisis has received so much attention, with so little to show for it, as the tidal wave of home foreclosures sweeping over America. Government programmes have been ineffectual, and private efforts not much better." Up to 9 million homes may enter foreclosure over the 2009-2011 period, versus one million in a typical year.At roughly U.S. $50,000 per foreclosure according to a 2006 study by the Chicago Federal Reserve Bank, 9 million foreclosures represents $450 billion in losses. UK The United Kingdom is a major developed capitalist economy. It is currently the world's sixth largest by nominal GDP and the sixth largest by purchasing power parity. It is the third largest economy in Europe after Germany's and France's in nominal terms, and the second largest after Germany's in terms of purchasing power parity. Its GDP PPP per capita is the 18th highest in the world. The United Kingdom is also a member of the G7, G8, G-20 major economies, the Commonwealth of Nations, the Organisation for Economic Co-operation and Development, the World Trade Organisation, and the European Union. The UK was the first country in the world to industrialise in the 18th and 19th centuries and for much of the 19th century possessed a predominant role in the global economy. However, by the late 19th century, the Second Industrial Revolution in the United States and the German Empire meant that they had begun to challenge Britain's role as the leader of the global economy. The extensive war efforts of both World Wars in the 20th century and the dismantlement of the British Empire also weakened the UK economy in global terms, and by that time Britain had been superseded by the United States as the chief player in the global economy. At the start of the 21st century however, the UK still maintains an important role in the global economy,due to its large gross domestic product and the financial importance that its capital, London, possesses in the world. The United Kingdom is one of the world's most globalised countries. The capital, London (see Economy of London), is a major financial centre for international business and commerce, the largest such in the world according the Global Financial Centres Index.The British economy is substantially boosted by North Sea oil and gas reserves, worth an estimated 246.2 Billion in 2007.The British economy is made up (in descending order of size) of the economies of England, Scotland, Wales and Northern Ireland. In 1973, the UK acceded to the European Economic Community which is now known as the European Union after the ratification of the Treaty of Maastricht in 1993. The UK entered its worst recession since World War 2 in 2008, but has since climbed its way back into growth: by Q4 of 2009 with a weak 0.4%; followed by a 0.2% growth in Q1 of 2010. . The recovery from the recession is expected to be slow. The British government expects annual growth in 2010 to be between 1% and 1.5% and 3.5% in 2011. Although the IMF predicts the UK will only grow by 1.3% in 2010 followed by 2.5% in 2011. UK Manufacturing grew at its fastest pace for 15 years in Q1 of 2010 aided by a weak pound, but a reduction in the services sector has seen a slow to negligible rate of recovery in 2010.

Economy of the United States

The economy of the United States is the world's largest nominal economy. Its nominal GDP was estimated at $14.2 trillion in 2009, which is about three times that of the world's second largest national economy, Japan. Its GDP by PPP is almost twice that of the second largest, China. The U.S. economy maintains a very high level of output per person (GDP per capita, $46,442 in 2009, ranked at around number ten in the world). Historically, the U.S. economy has maintained a stable overall GDP growth rate, a low unemployment rate, and high levels of research and capital investment funded by both national and, because of decreasing saving rates, increasingly by foreign investors. In 2006, consumer spending made up 70 percent of the United States Gross Domestic Product. Since the 1960's, the United States economy absorbed savings from the rest of the world. The phenomenon is subject to discussion among economists. Like other developed countries, the United States faces retiring baby boomers who have already begun withdrawing from their Social Security accounts; however, the American population is young and growing when compared to Europe or Japan. The United States public debt is in excess of $12 trillion and continues to grow at a rate of about $3.83 billion each day. The American labor market has attracted immigrants from all over the world and has one of the world's highest migration rates. Americans have the highest income per hour worked. The United States is ranked second, down from first in 2008-2009 due to the economic crisis, in the Global Competitiveness Report. The country is one of the world's largest and most influential financial markets, home to major stock and commodities exchanges