The global financial crisis can be traced back to July 2007, when the well-known “credit crunch” occurred. The credit crunch was the time when lack of investor confidence in the U.S. real estate system caused a liquidity crisis. This happened because of defaulted subprime loans that forced banks to repossess homes and land making them less valuable than they originally sold them for. Many may say that this was the beginning of the crisis, but the effects of the crisis became more intense after the stock market crash and the collapse of Lehman Brothers. Economies around the world have been hit by the collapse of large financial institutions, bailouts of banks by national governments, and downturns in stock markets around the world. The causes of the global financial crisis date back to the 1930s during the Great Depression. Regulations designed during the Great Depression were the cause of the increasing inflation of the US dollar. President Nixon realized the harmful effects that would result from inflation, so he instituted programs that would allow for floating interest rates while promoting deregulation. Banks and financial institutions have found solutions to eliminate regulations that restricted them, while at the same time individuals have become more interested in their monetary transactions and savings. Local banks were purchased by larger institutions that then expanded to offshore locations, driving global financial liberalization. Financial innovations were a significant factor that caused the global financial crisis, making it easier and faster to make transactions around the world. Among these, the most recognized were securitization and hedge funds. Securitization made it easier for a person to obtain large amounts of paper… resulting in the negative outcomes that occurred. The crisis significantly reduced global trade, caused numerous home foreclosures and created high levels of unemployment. In addition to the negative aspects, it can be argued that the crisis has also brought some positive effects. Economists believe that the crisis has highlighted important flaws that are essential to repairing the economy. These flaws include regulation of some financial innovations, increased attention to risk management when making loans, and monitoring of executive compensation. My individual analysis of the crisis focuses on these positive effects. I believe we can learn from our mistakes so as not to repeat the past. If financial institutions and governments correct the corruption and inflation in our economy, we can return to a more stable and reliable stock market and economy..