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Great Recession

Definition

The Great Recession was a severe worldwide economic crisis that took place from 2007-2009. It was sparked by a downturn in housing markets, risky lending practices, and complex financial products tied to U.S mortgages.

Analogy

Imagine you've built an elaborate tower out of playing cards - this represents our financial system before 2007. Some cards are more unstable than others - these represent risky loans and mortgages. When those unstable cards collapse under pressure, it causes your entire tower - or financial system - to come crashing down.

Related terms

Subprime Mortgage Crisis: These are the unstable cards in our analogy. It refers to the sharp increase and subsequent crash of housing prices, driven by an increase in risky lending to borrowers with poor credit.

Financial Crisis of 2008: This is when the card tower collapsed. It was a severe worldwide economic crisis that occurred in the financial world and was the most serious financial crisis since the Great Depression.

Stimulus Package: This is like trying to rebuild your card tower after it's fallen down. A stimulus package is a coordinated effort by the government to increase spending and investment to "stimulate" an economy out of a downturn.