Analysis Discussion

What caused the 2007/2008 Financial Crisis?

Note: this article is part of our collaboration with Filmynomics. To find out more about the consequences of the 2008 Financial Crisis and how it affected people worldwide, please read their article here: 


The Financial Crisis of 2007 and 2008 led to the Great Recession (2007-2009), the worst economic downturn since the Great Depression of the 1930s. Additionally, the financial crisis caused the failure of multiple major investment and commercial banks and nearly caused the collapse of the international financial system. It is safe to say that everybody was impacted by the Financial Crisis in one way or another. What could have caused such a devastating crisis?

Role of the Federal Reserve (Fed)

Between May 2000 and December 2001, the Fed decreased the federal funds 11 times—from 6.5% to 1.75%. This meant that consumer banks were now able to offer low-risk borrowers lower interest rates. Furthermore, the lower federal fund also meant that banks were encouraged to lend more to high-risk borrowers, albeit at higher interest rates. As bank loans became easier to acquire, the housing market began gaining attention. People used these loans to purchase more expensive homes, causing the prices of homes to skyrocket. This created a so-called “housing bubble.”

Commercial Banks Perpetuate the Crisis

The “housing bubble” problem was aggravated because changes were made to the bank laws in the 1980s, allowing banks to offer mortgages with “balloon payments”. Loans with balloon payments have the largest payment of the loan due towards the very end of the loan period. As the prices of houses continued to increase, people who could not pay off the loan were able to borrow more money against the value of their homes. If these people were still unable to pay off the loans, the bank could resell the house for more than it was originally worth. 

Banks often sought to make profits, therefore more banks adopted the practice of giving mortgages to high-risk customers with few assets. The banks would take advantage of these customers, as they knew that they would not be able to repay the loan. Such mortgages are known as subprime mortgages and are often viewed as the main cause of the crisis by economists.

Securitization by banks

As the number of subprime mortgages and other consumer debt began piling up, banks started to sell these mortgages in capital markets as bonds (securities) to other banks and investors. Purchasers of bonds that were primarily based on mortgage-backed bonds (mortgage-backed securities, MBSs) were entitled to receive shares of the payments made on the original loan. By selling MBSs, banks could increase their liquidity and reduce the number of risky loans they owned, while banks that were purchasing MBSs could “diversify their portfolios and earn money.” As the housing prices continued growing, MBSs became increasingly popular.

Merging of Banks

In 1999, the Depression-era Glass-Steagall Act was repealed. This act prevented banks and insurance companies from involving themselves in each other’s markets and merging. The repeal led to banks growing and becoming “too big to fail.” In 2004, these huge banks were stimulated to buy and sell even more MBSs because the Securities and Exchange Commission decreased the ratio of capital that banks were required to have, preventing insolvency. This became problematic because the value of the MBSs was reliant on the indefinite increase of housing prices. 

Overconfidence of the people involved

Overall, government officials, economists, and bank executives were convinced that financial crises were things of the past due to the long period of global economic stability and growth. They believed the business cycle of a period of economic growth followed by a recession had finally been overcome. This meant that almost everyone was oblivious to the clear signs of the imminent financial crisis.


In summary, the 2007-2008 financial crisis can be attributed to a variety of factors. Although economists are still debating on the exact breakdown of the factors, and to what extent they were responsible, many people believe subprime mortgages and the banks’ risky behavior as the main cause. Do you agree?


Duignan, Brian. Financial crisis of 2007-2008, accessed through (05.09.2021)

Jickling, Mark. 2009. Causes of the Financial Crisis, accessed through (03.09.2021)

Field, Anna. 2021. What caused the Great Recession? Understanding the key factors that led to one of the worst economic downturns in US history, accessed through (03.09.2021)

Analysis Discussion

Spatial Inequality – A Conversation That We Need To Start


By definition, spatial inequality is the unequal distribution of resources and services across different areas or locations, such as healthcare, welfare, public services, household income, and infrastructure. The distribution of such characteristics over space can be described in terms of proximity, distance, clustering, and concentration, according to Wikipedia.

Why Spatial Inequality is a Problem

Over time, spatial inequality has led to strong divisions, not only across borders but also within local communities. Currently, in Nairobi, over 60% of the population lives on less than 5% of the land- creating large economic disparities. The poorer population lives with inadequate living standards, which includes minimal access to important services such as healthcare and education. Most would agree that this is a direct result of colonialism, where colonizers segregated people by race, level of income, and many more factors. 

Causes of Spatial Inequality

However, it is arguable that income inequality and economic disparities have been one of the main driving forces behind spatial inequality. In Nairobi, for example, more than 65% of the population (around 3.5 million people) live within the informal sector. The advantage of the informal economy is that it provides income and employment to people, regardless of education and experience. These are qualities that the formal economy is deemed to be reliant on. However, the informal economy has costs, also. Many of those who are forced to work within the informal sector — in jobs such as street vendors, flea, and food markets — have had to rely on this unstable source of income, a result that can be traced back directly to unequal access to services such as education. 

The densely populated slum communities within Africa are the home of millions of citizens throughout the continent. However, since these homes have been set up quickly, without building regulations and without being previously planned by the city councils, important services were not set up. These important services could potentially cater to the new settlers, educating them so that one day they can acquire a job within the formal sector, thus removing them from this constant cycle of poverty.

Efforts to Combat Spatial Inequality

Currently, schools that have sprouted within slum settlements are being bulldozed, as the local government aims to rid cities of “informal settlements.” Unfortunately, they are failing to do so miserably. In 2018, the headline “Schools for 2000 children in Kenya’s Kibera slum bulldozed to the ground” hit the media and news outlets, showing the world that rather than helping combat income and spatial inequality, governments were willing to destroy livelihoods in an attempt to rid the city of the ‘problem’ — namely, the informal sector.


It is important to understand the risk and the impact that both spatial and income inequality can have on the livelihoods of those who live within these make-shift settlements. It is imperative that we combat this issue, in similar ways that one would address racial or gender inequality. I hope that one day we can live in a world where no parent has to worry about being able to feed their children; a world where children can dream about what they want to be when they grow up; a world where home is not a temporary shelter, but a place where love and happiness can thrive.



Has the British history education system been ‘white-washed’?

Throughout my education, I was given a wealth of knowledge, or so I believed, surrounding many influential and pivotal moments within history. However, on reflection, I noticed that the whole story had not been told, whether this be a missing key person that influenced a decision that changed history or an unknown warrior that helped fight for Britain, one way or another.  The British education system focuses mainly on the achievements of those who are Caucasian. Therefore, I believe that not only is our education system failing us, but it is also one of the reasons that systemic racism exists in such a progressive time period. I hope that we can one day live in a world where everyone and their achievements can be celebrated equally, no matter their race, ethnicity or background, a world where equality is commonplace. 

Today I leave you with this poem by John Agard, who wrote “Checking out me history”, to remind us to explore the influence of a variety of people, to fill the gaps, that our education system left out so carelessly.

Checking Out Me History:

Dem tell me
Dem tell me
Wha dem want to tell me

Bandage up me eye with me own history
Blind me to me own identity

Dem tell me bout 1066 and all dat
Dem tell me bout Dick Whittington and he cat
But Toussaint L’Ouverture
No dem never tell me bout dat

A slave
With vision
Lick back
And first Black
Republic born
Toussaint de thorn
To de French
Toussaint de beacon
Of de Haitian Revolution

Dem tell me bout de man who discover de balloon
And de cow who jump over de moon
Dem tell me bout de dish ran away with de spoon
But dem never tell me bout Nanny de Maroon

See-far woman
Of mountain dream
Fire-woman struggle
Hopeful stream
To freedom river

Dem tell me bout Lord Nelson and Waterloo
But dem never tell me bout Shaka de great Zulu
Dem tell me bout Columbus and 1492
But what happen to de Caribs and de Arawaks too

Dem tell me bout Florence Nightingale and she lamp
And how Robin Hood used to camp
Dem tell me bout ole King Cole was a merry ole soul
But dem never tell me bout Mary Seacole

From Jamaica
She travel far
To the Crimean War
She volunteer to go
And even when de British said no
She still brave the Russian snow
A healing star
Among the wounded
A yellow sunrise
To the dying

Dem tell me
Dem tell me wha dem want to tell me
But now I checking out me own history
I carving out me identity


Should housework be included in the GDP?

Gross Domestic Product (GDP) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period. However, it doesn’t include a broad fraction of human labour. In SNA terminology, unpaid labor corresponds to the category of ‘own-account services.’ This includes activities such as childcare, cleaning, meal preparation, and care for the sick and elderly. All of those are excluded from GDP as they are repetitive actions, which are not contributing to actual production.

What is your opinion? Do you think GDP measurements should be changed?

Additional reading:


The most important issues

What are the most important issues facing the world today (besides the coronavirus pandemic) and why?

We look forward to reading your ideas!


What is Money?

This week’s discussion post is about what money actually is. Feel free to comment anything that comes to your mind or you could even add another quote you found. We look forward to reading your ideas!

“Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver.”

Ayn Rand

“Money is economic power.”

Walter Bagehot


What role does economics play in your everyday life?

This week we are asking you what role economics plays in your everyday life. Are there certain decisions you make because of economic reasoning? How has studying economics changed / affected you?

“Economics is everywhere, and underestimating Economics can help you make better decisions and lead a happier life.”

Tyler Cowen

“The purpose of studying Economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists.”

Joan Robinson


What is Economics for you?

Today’s discussion post is a little different… We are asking you what economics means to YOU personally!

Here are some quotes to inspire you:

“Economics is the painful elaboration of the obvious.” – Friedrich von Hayek

“Economics is a study of cause-and-effect relationships in an economy.” – Thomas Sowell


Are History and Politics Related?

“The Study of history is the beginning of political wisdom.”

Jean Bodin

“The close relationship between politics and economics is neither neutral nor coincidental. Large governments evolve through history in order to protect large accumulations of property and wealth.”

Michael Parenti

“History is past politics, and politics present history.”

Edward Augustus Freeman

Let us know in the comments what you think about these quotes!

Do you agree with the statement that history and politics are related?


Domestic Economic Effects: US Elections

Next week, Americans will cast their ballots. They will choose the incumbent, Donald J. Trump, or running ex-vice president, Joe R. Biden.

No matter what, one will win. That president will bring in new edicts, decrees, and due to COVID-19, stimulus packages to assist a restart of the American economy. This will result in different possible economic effects: whether on Wall Street, in firms, or the hinterlands.

Nonetheless, Americans are bracing for the third of November.
You can find a few articles below which will broaden your knowledge of the economic effects of the US elections on Washington’s national policymaking and possible economic predictions below.



Feel free to add to the discussion in the comments.