Three stages of financial crisis within the US Essay

Three stages of financial crisis within the US - Essay Example In September 2008, Lehman Brothers announced that it was facing bankruptcy which created an overall panic all across the board. US government and other western government started injecting money into the banking system to stop big banks from going bankrupt. Moreover, credit flows to the private sector also stopped causing US economy and other economies to slow down. Interest rates were also increased in order to adopt a cautious approach in such difficult circumstances. Later in the winter season of FY09, US and other G20 countries started to cut dwon interest rates, so it could stop economy going into slump (Elliott, 2011). Later, when risks of bank’s solvency reduced, the focus shifted on government issues. High fiscal deficits caused governments to face severe problems as the economies were going through an overall slowdown. Different European countries like Spain and Greece went into deep trouble due to the ballooning fiscal deficit. IMF and EU had to inject money into their system in order to maintain smooth