The Great Recession
The recession of 2008-2009 was not a normal downturn in the business cycle. Rather it was a cyclical downturn exacerbated by several extraordinary factors.
The housing bubble and subprime mortgages buried within globally distributed mortgage-backed securities touched off a crisis in the financial markets and banking system that made it far more difficult to pull out of the recession. Banks were very reluctant to lend, and bank lending helps businesses and consumers to spend and thus boost demand.
Consumer debt was already at record levels going into the recession, which also meant that households were unable and unwilling to borrow more. In times of financial stress, consumers reduce spending and focus on paying for necessities ...