The Great Recession (also referred to as the Lesser Depression, the Long Recession, or the global recession of 2009) is a marked global economic decline that began in December 2007 and took a particularly sharp downward turn in September 2008. The initial phase of the ongoing crisis, which manifested as a liquidity crisis, can be dated from August 7, 2007, when BNP Paribas, citing a "complete evaporation of liquidity," terminated withdrawals from three hedge funds. The bursting of the U.S. housing bubble, which peaked in 2006, caused the values of securities tied to U.S. real estate pricing to plummet, damaging financial institutions globally.
The global recession has affected the entire world economy, with greater detriment to some countries than others. It is a major global recession characterized by various systemic imbalances and was sparked by the outbreak of the U.S. subprime mortgage crisis and financial crisis of 2007–08. The economic side effects of the European sovereign debt crisis, austerity, high levels of household debt, trade imbalances, high unemployment and limited prospects for global growth in 2013 and 2014 continue to provide obstacles to full recovery from the Great Recession.
According to the U.S. National Bureau of Economic Research (the official arbiter of U.S. recessions) the recession began in December 2007 and ended in June 2009. US mortgage-backed securities, which had risks that were hard to assess, were marketed around the world. A more broad based credit boom fed a global speculative bubble in real estate and equities, which served to reinforce the risky lending practices.
The bad financial situation was made more difficult by a sharp increase in oil and food prices. The emergence of sub-prime loan losses in 2007 began the crisis and exposed other risky loans and over-inflated asset prices. With loan losses mounting and the fall of Lehman Brothers on September 15, 2008, a major panic broke out on the inter-bank loan market. As share and housing prices declined, many large and well established investment and commercial banks in the United States and Europe suffered huge losses and even faced bankruptcy, resulting in massive public financial assistance.
A global recession has resulted in a sharp drop in international trade, rising unemployment and slumping commodity prices. In December 2008, the National Bureau of Economic Research (NBER) declared that the United States had been in recession since December 2007. Several economists predicted that recovery might not appear until 2011 and that the recession would be the worst since the Great Depression of the 1930s. Paul Krugman, who won the Nobel Memorial Prize in Economics, once commented on this as seemingly the beginning of "a second Great Depression." The term "Great Recession" was originally coined by Joseph Pierri, an economist at Washington State University. The conditions leading up to the crisis, characterized by an exorbitant rise in asset prices and associated boom in economic demand, are considered a result of the extended period of easily available credit and inadequate regulation and oversight.