How did the Great Recession start?

In simple terms how did the credit bubble (recession) in 2007 start?

• And how are we getting out of it in the UK??

• Answer:

  Organisations lent money to people who couldn't afford to pay it back. They didn't bother to check income and job stability or credit history. This debt was then sold and resold through a process called 'derivatives' a 'new' financial product designed by bankers to allow trade in specialist debt. Long story to explain exactly how it went pear shaped but basically there was effectively a type of 'creative accounting' and there wasn't actually any value in the debt. When people didn't pay and others went to get the 'assets' invested in there weren't any assets to seize for the debt.That caused a 'Domino effect' as it unravelled and banks etc discovered they had been buying back debt they had sold to someone else. As for the last part. Trading. Until the real value of assets generated through mining/agriculture/added value processing and inflation outstrips the debt then the fiscal balance will remain in the negative. It is why some claim that financial services are so important to the UK to get us out of the debt as it is 20% of our GDP (total trading value known as Gross domestic product) In other words those who created the mess have to get us out of it ~ People don't mind that, only that they are getting big bonuses for putting right what they big bonuses for getting wrong. Countries use taxation to pay back old debt more quickly so they can borrow 'new' money at reasonable rates that inflation/growth and rising taxes will erode. There are various views as to the speed we should go and how long it will take at any speed chosen, the range is from 20 -50 years (as a guide in 2007 we finally finished paying USA for all the equipment and resources we 'purchased' during WW2 and in 2010 Germany made the last payment on its war debt to the UK) The current financial problem is bigger than those debts.