A debt crisis occurs when a country is unable to repay its loans. Because it is overarching, a debt crisis is indicative of the overall heath of the national economy, international loans, and budgeting. When a country is faced with a debt crisis, it cannot pay off its financial obligations and must seek out assistance.
The United States faced a debt crisis on the heels of the housing market collapse and overall weakening economy. In December 2007, the U.S. entered into the Great Recession—and it lasted for 18 months. Over that time, the economy ground to a halt; businesses and individuals began to default on loans and banks saw their balance sheets shrink. To stave off further economic shock, banks made it more difficult to borrow, as cutting off liquidity means businesses cannot invest in growth and individuals cannot consumer.
To stave off an all-out economic collapse, the Federal Reserve stepped in with its first of three rounds of quantitative easing in November 2008. Since that time, the Federal Reserve has printed over $3.0 trillion and the U.S. national debt has soared from roughly $9.0 trillion to $18.0 trillion. The U.S. continues to run a budget deficit and does not expect to run a surplus until 2024; this means the U.S. debt crisis will not be under control for another decade.
Wall Street opened lower on Wednesday, July 8, on worries over Chinese financial instability and Greece’s debt crisis remaining unsolved.The main Chinese index, the Shanghai Composite, plunged nearly 30% from mid-June. On Wednesday, the Shanghai Index dropped by 6.75%. Trading on nearly half of every stock listed was halted.. Read More
Wall Street opened flat on Tuesday, July 7th, as talks between Greece and its creditors resumed. The U.S. trade deficit widened in May, reflecting concerns over weak global demand.European stocks continue to slide while the euro hit a five-week low against the dollar. In China, the stock market fell again despite the emergency measures. Read More
Wall Street opened sharply lower on Monday July 6, 2015, as Greek people rejected the bailout package by creditors on Sunday, putting the euro on edge. European stock markets plunged as Greece’s exit from the eurozone seems to be likely.After Greece overwhelmingly voted against conditions for a rescue package on Sunday’s referendum,. Read More
On Sunday July 5th, Greece citizens will vote on a referendum that may be remembered as the start of a global economic collapse. The referendum comes just days after Greece defaulted on its debt payments to the International Monetary Fund (IMF). (Source: Business Insider, July 3, 2015.)The small Mediterranean nation ran short of money. Read More
Wall Street opened slightly higher on Thursday, July 2nd, as job growth slowed down in June, lowering the probability that the Federal Reserve will raise the interest rate this year. European stock markets traded lower and the mood was one of caution with Greece set to vote on a referendum on Sunday.Job growth slows down in the summer. Read More