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The combined effect of the financial crisis and economic recession led to many bank failures. A credit squeeze by banks on consumers and on the private sector resulted. Many investors lost a large portion of their investment portfolio in stock. Many lost huge sums of money in their real estate investments. The combined effect of these led to reduced demand. A decline in demand for products or services generally leads to lower profits; in fact, a drastic decline will dissipate the profits. Unemployment was a natural consequence of reduced demand and businesses cutting their work force. Many states experienced declines in real GDP in 2008. Another significant development was the loss of savings
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The U.S. financial crisis led to a global financial crisis and eventually to a world recession. Even though almost all countries were negatively impacted, countries that had similar policies to the U.S., especially with regard to lending and subprime lending in particular, were more severely impacted. Many European countries fall under this category. It affected many countries in Asia, the Pacific region, and Latin American regions, but there was a quick rebound. It particularly affected countries in Africa, possibly because of the fragile economic recovery of many African countries in the last decade. The financial and economic dependence of many African countries on the U.S. and many countries in the western hemisphere perhaps also contributed to the severe impact.
Investors from all over the world who invested in many U.S. securities, especially the mortgage backed securities, were also negatively affected impacted because most of these securities turned out to be toxic.
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