The five worst financial crises of our time
Filed under: News
However, the credit crunch that began the collapse of Northern Rock is far from the only financial crisis to rock the world over the last century or so. Here are our top five.
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1. The Great Depression
The Great Depression - a global economic downturn that spanned the 1930s - began with the market crash of October 29, 1929, otherwise known as Black Tuesday.
More than $30 billion (£18.5 billion) - or some $800 billion in today's money - disappeared from the US economy over the next two weeks alone, sparking the longest, most widespread, and deepest financial depression of the 20th century.
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The effect was devastating in both rich and poor countries across the world, with unemployment in the US rising to 25% and hitting 33% in some countries.
2. The 1980s/1990s negative equity nightmare
Negative equity, which occurs when the value of your mortgage is more than the value of your home, caused misery for millions of UK families in the early 1990s.
It was a result of the 1980s housing boom, which came crashing down at the end of the decade - leaving an estimated 1.8 million homeowners dealing with a negative equity nightmare.
While some managed to sit it out, rising interest rates forced more than 75,000 families to give up their homes for repossession during 1992 alone and house prices dropped by 13% over the four years to 1993.
3. The dot.com bubble
The $1 trillion dot.com boom was the biggest investment frenzy since the 1700s, with start-up technology companies years from turning a profit suddenly valued at tens of millions of pounds.
At its peak, everyone from seasoned investors to lifelong cash savers were pouring money into dot.com stocks.
Three months after the beginning of 2000, however, the bubble burst. Dot.coms became virtually worthless overnight, shedding at least £3 trillion in market value and leaving all those who had believed in them out of pocket.
4. The credit crunch/banking crisis
Prior to summer 2007, few people had heard the phrase "credit crunch".
Defined as "a severe shortage of money or credit", it was caused by default rates on so-called sub-prime loans - which were readily available at the time to people with poor credit scores and low incomes - rising to record levels both here and overseas, notably in the US.
For many Britons, however, the first concrete sign of the trouble ahead was the sight of thousands of worried savers queuing to get their money out of Northern Rock before it collapsed.
The bank was eventually bailed out by the government. That was by no means the end of it, though.
Soon after, the government had to bail out both Lloyds Banking Group and the Royal Bank of Scotland to the tune of £21 billion and £45 billion respectively.
5. The "double dip" recession
The current recession, which began in 2008, came hot on the heels of the credit crunch.
Unfortunately, while the economy looked like it was on the up in 2011, its failure to maintain that momentum means that the current downturn has since become the UK's first "double-dip" recession since the 1970s - when the depth of the recession was not as great.
Figures indicate that the situation in Britain is now even more severe than the Great Depression, when the country's GDP recovered its previous high after nearly four years. And we are not out of the woods yet.
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