The last few years have seen the world go through a pretty big financial crisis. Almost all countries have been affected by it. There are a lot of questions that have to be answered about just what happened to cause the global financial crisis.

The most direct cause of the global financial crisis was the bursting of the housing bubble in the United States in 2006. This led to sharp decrease in the value of houses which ultimately led to a number of people defaulting on their mortgages. The reason for the bursting of the housing bubble was that interest rates had started to rise. This was also why people had trouble paying their mortgages, they had borrowed more than they could afford and when interest rates went up they found that they couldn't pay their bills but they also couldn't sell their houses since they were now worth less than the amount they owed on the mortgage.

While the bursting of the housing bubble was the direct cause of the financial crisis it was the events that led up to it that were the real cause. The main issue here was that banks started giving out mortgages to people they never should have been lending money to. They did this because they needed to keep the customers coming in so that profits would remain high. They eventually got to the point where everybody who was a good credit risk already had a mortgage so they had to start issuing mortgages to people who were bad risks in order to keep the money coming in.

The reason that the banks were willing to give mortgages to people who were bad risks was because they weren't the ones taking the risks. Through a process called securitization the banks were able to sell the mortgages that they had written to investors who had no way of knowing that they mortgages had been given to people who were likely to default. This was the real reason for the global financial crisis, the banks were giving out high risk loans because they had figured out a way to pass the risk off to other people.

The financial crisis really shouldn't have been as bad as it was, the amount of the bad loans was actually fairly small when measured against the global economy. The problem was that in order to sell the bad loans to investors the banks had to hide them as part of other investments. The result was that when the defaults started occurring nobody knew who was holding the bad loans. As a result it nobody wanted to lend money to anybody because they weren't sure if the people they were lending to would end up in financial trouble as a result of the bad loans. This resulted in the credit markets coming to a complete halt and that created the global financial crisis.