How Wall Street crashed the global market

Feb 27, 2024 3:14:38 PM

2008 was the year of the biggest economic crisis since the Great Depression of the 20th century. Mainly due to a bubble in the real estate market and precipitated by the collapse of the traditional US investment bank Lehman Brothers, the crisis led to a loss of more than 2 trillion dollars for the global economy. It required the government to bail out several banks, some of which were hitherto considered too big to fail.

The pivot of the economic crisis is related to an expressive growth of loans for people with low income, for investment in the real estate market. When the housing market and home prices began to decline, borrowers could not afford mortgage fees. And with the properties been devalued, it was no longer possible to refinance them. The system worked well with a bull market, but it was not ready for a declining market. Suddenly, a crisis of confidence led to a crash.

In an attempt to circumvent the situation, the US treasury began to bear the costs of rescuing large financial institutions. This gesture was negatively received by the population: while the greedy companies were being bailed out, the regular people continued to lose their homes. This crisis was just the beginning of a greater distrust of the population in markets and governments.

A few years after that event, in 2011, the movement Occupy Wall Street emerged. One of its slogans read “We are the 99%”, in reference to the richest 1% of the population, which owns a great part of the world’s capital. Inflation, recession and unemployment followed the 2008 crash. In the following years, several countries would go through severe economic crises, such as Greece, Portugal, Ireland, among others.

It is in this scenario of crisis and mistrust that Bitcoin appears. Unlike fiat money, which is issued by central banks and whose government can, in theory, debase, Bitcoin has a fixed rate of issuance and a stipulated cap of 21 million coins. Ruled by no one, or purely by code, it is a that cannot be debased.

Digital money, without the need for a regulatory power, sent and received completely anonymously. That was the old dream of a libertarian movement that started a few decades earlier, and whose participants were all involved, in one way or another, with the forerunners of Bitcoin. Now, we’re talking about the .

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