Financial crisis
A disruption where credit contracts, institutions fail or merge under stress, and asset prices fall sharply—often transmitting to jobs, state revenues, and trade.
Crises typically combine leverage, runnable short-term funding, and loss of confidence in collateral values. Policy responses layer central-bank liquidity, fiscal backstops, resolution of failing firms, and post-crisis regulation—each choice redistributes losses across taxpayers, creditors, and borrowers.
The same label covers localized bank runs and systemic meltdowns; scale and cross-border linkages determine whether stress stays in finance or becomes a deep recession.
Lessons for macro policy
The Great Recession renewed respect for discretionary fiscal stabilization and for central banks as lenders of last resort, while undermining complacency that markets always clear without public intervention—themes developed in the Financial Crises Explained and banking regulation topics on this site.