The Great Recession Is The Second Event That Sparked The...

The Great Recession is the second event that sparked the global financial crisis. According to the IMF, recession is sad to exist if there is a decline in the real per-capita world gross domestic product, and this great recession did not disappoint (Davis, 2009). US banking systems were vulnerable to bank run, thanks to loose regulatory supervision (Andrews, 2008). The collapse of Lehman Brothers caused established commercial and investment banks in the US and Europe to suffer huge losses, and such banks requested massive government bailouts (Krugman, 2014). The Great Recession allowed for a simultaneous drop in international and commodity prices while raising the unemployment, dubbing this the beginning of a second Great Depression by†¦show more content†¦The euro maintained a low interest rate, causing Spain to run on deficit on its current-account balance. Public revenues and outputs also began to fall, while increasing public spending, transformed budget surplus into bud get deficits. Within the country, the Spanish economy itself and its once-stable economy banking system suffered tremendously. Due to the unpredictable waves of its economy, Spain continues to fail in predicting when the crisis will attack again and if recurrence will take place (Ordonez, 2012). At the peak of the global financial crisis, GDP fell and unemployment rose, coinciding with products breakdown and jobs destruction. Housing investment was a major affected component. Household saving rates were reduced to a minimum, while fixing their capital investment at a maximum. Such behaviors resulted in high household debts. With the weakness of household incomes and the long-term debt amortization for home purchases, these all hindered the rapid depletion of liabilities (Cruz, 2011). Spain’s inability to automatically adjust the supply, resulted in high tension of prices. This increase reached new heights when price expectations affected their own demand, provoking a landslide of demand, supply, and price growth (Prakash Loungani, 2008). Price growth caused high sectorial inflation, thanks to its demand’s overreaction. A strong overvaluation of residential real estates existed from sharp decrease and revaluation of housing property