ABSTRACT
The global economic crisis of 2008–2009, by most accounts, originated in the financial crisis in the United States, which itself arose from the subprime mortgage crisis of 2008. This crisis involved the granting of millions of loans to consumers who subsequently were unable to pay their monthly payments. The overleveraging in the housing sector then had major consequences for the balance sheets and liquidity of commercial banks, which in turn resulted in a severe credit squeeze in 2008 and the first half of 2009. The globalization of financial markets over the prior two decades quickly proved to be a source of vulnerability for banks outside of the United States as well. The extraordinary growth of global financial assets from US$12 trillion in 1980 to up to US$241 trillion in 2007, as estimated by the IMF, was reflected in the wide distribution and deepening of assets across countries (IMF 2009a). In 2000, only 11 countries had financial assets of more than 350 percent of the GDP, but by 2007 this number had reached 25 (Blankenburg and Palma 2009).
