ABSTRACT
This chapter describes the 2007–2008 financial crisis, and examining the causes of such crises in general. It looks at the growing inequality of wealth and income in the United States—a central aspect of the financial crisis and a major economic challenge of the current century. The chapter suggests that some measures for avoiding future crises and creating a stronger and more sustainable economic system. The low interest rate was a boon to consumers who, amid stagnant wages, increasingly turned to the credit market to meet their consumption needs. While low interest rates are attractive to borrowers, they are decidedly unattractive to lenders. The financial crisis that started in the United States quickly spread to the rest of the world. World economic growth, which had remained relatively steady between 2004 and 2007, experienced a sharp decline of almost 3 percent in 2009.
