1 The Great Destruction: Causes of The Global Financial Crisis in 2008

This chapter summarizes the causes of the global financial crisis in 2008, which is called ―Great Destruction‖, with the emphasis on the US. The causes could be divided into three interconnected categories. First, the US housing price speculative bubble and its bursting. Second, the credit bubble leveraged with complex financial instruments which accompanies and reinforces the housing bubble under a lax financial regulatory system based on the self-regulatory belief. Third, the global imbalance. The global savings glut crowding into the US provided the fundamental sources of bubbles. This chapter also discusses the consequences of the Great Destruction as well as policy responses