The current global crisis, as is well known by now, has its genesis in the imprudent practices of banks and nonbank institutions worldwide, especially in the US. The fact that more than 80 banks have failed in the US alone is a pointer to how deep and widespread the malaise was.
Looking at the past few years, it may be useful to divide the causes of the current crisis into two broad categories: macroeconomic and microeconomic. The macro-economic causes fall into two groups: problems associated with the build-up of imbalances in international claims and difficulties created by the long period of low real interest rates.