The so-called Great Recession of 2009, the biggest economic downturn since the Great Depression of the 1930s,1 was a global economic recession sparked by the US sub-prime mortgage crisis and the subsequent credit crunch and financial crash of 2007-08. Years on and its effects, in the form of austerity, high levels of unemployment and of household and government debt,2 and limited prospects for growth, have a continuing influence in many countries. ‘Austerity’ has been described as ‘a form of voluntary deflation in which the economy adjusts through the reduction of wages, prices and public spending to restore competitiveness, which is (supposedly) best achieved by cutting the state’s budget, debts and deficits’ (Blyth, 2013, p 2).

The first chapter of this book describes how the contemporary banking and financial system works, and highlights the key role it has come to play in developed economies. Chapter Two tells the story of how, when a US housing bubble burst, trillions of dollars’ worth of risky mortgages came to infect global markets, nearly bringing down some of the most strategically important financial institutions on the planet, as well as plunging most developed Western economies into recession. Together, these chapters should help readers gain a basic understanding of why the financial system imploded as it did in 2007-08, and how what started as a financial crisis became a broader economic and sovereign debt crisis.

Depending on how much you already know about the world of banking and finance, or indeed want to know about it, I anticipate that you may want to dip into the Appendix for more information on the various financial instruments, processes and institutions that are referred to in Chapters One and Two, either on a ‘need to know’ basis or perhaps more extensively. The A-Z rough guide provides considerably more extended commentary than you would normally find in a conventional glossary or jargon buster on the constituent parts of the global financial system and the innovative financial products that are heavily implicated in the crisis, and it should give you a better technical understanding of the workings of global finance. But it may also overload you and disrupt the flow of your reading, so it may be a good idea to read through Chapters One and Two fairly quickly, without consulting the Appendix, with a view to getting the gist of what is being written.