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In the early 2000s, world economic growth seemed indestructible. Borrowing money was easy. Resulting debts and loans were combined into CDOs ('collateralised debt obligations'), mysterious packages that banks traded amongst themselves, conjuring new money apparently out of thin air. There was talk of 'boom and bust' being a thing of the past.
But in August 2007, the cost for banks to borrow money abruptly rose. The US property market, built on overambitious cheap 'subprime' loans, collapsed as homeowners could not repay at new higher rates. The global money bubble burst. Stock markets plummeted.
Lehman Brothers - a 150-year-old US bank with 26,000 employees worldwide - was the first major casualty. In September 2008, with its clients deserting and its assets drastically devalued, it declared bankruptcy. Domino-like, chains of banks - and even national economies, such as Iceland's - fell into similar trouble. Panicking governments all over the world scrambled cash to prop up the banking system. Borrowing money for businesses and individuals became almost impossible. Economies across the world slowed down, losing millions of jobs.
Image Copyright: John Frost Newspapers
Shelfmark: British Library Newspaper Archive