What was the primary cause of the 2008 financial crisis in the United States?

The primary cause of the 2008 financial crisis in the United States was indeed the subprime mortgage crisis. During the early 2000s, there was a significant increase in housing prices, and lenders began offering mortgages to borrowers with poor credit histories, known as subprime borrowers. These loans often came with high-interest rates and were predicated on the assumption that home values would continue to rise.

As housing prices began to decline in 2006 and 2007, many subprime borrowers could not afford their mortgage payments and began defaulting on their loans. This surge in defaults led to massive losses for banks and financial institutions that had invested heavily in mortgage-backed securities, which were financial products made up of slices of these risky loans. The interconnectedness of these financial products created a widespread loss of confidence in banking institutions, leading to further financial instability and the eventual collapse of major firms like Lehman Brothers.

Other options, although they may have contributed indirectly, did not play a central role in the financial crisis. High taxation rates did not significantly impact the immediate financial landscape, global warming impacts were not a factor in the economic situation, and while trade deficits are relevant to economic discussions, they were not a driving force behind the collapse of the housing market