What is the major reason behind economic crisis?

It's just a shame that they never seem to learn from these mistakes. Probably because the people who make them get fired, so aren't around next time the situation occurs to say that it's a bad idea.

So the banks provided the larger loans than the price value of mortgaged property, and when their business collapsed, they didn't pay off the loan. The banks then could do nothing than to sieze the less valued mortgaged property...I hope by now the banks has learned a lesson and has made the strict policy towards loans... Well in my country rather than economic crisis, we have the major problem of energy crisis nowadays. But we also have the economic crisis problem...

Unfortunately, I doubt anybody has learned anything for the long term. We seem to get a financial crisis every 20 years or so. Admittedly, this is substantially worse than the last one, and possibly the worst since the Depression, but many of the things done to create this one are very similar to what was done to create the recession in the late 80's.

I think its very simple - everyone was spending more money than they actually had. The banks were guilty of lending money without thinking of the customer's ability to pay it back. In many cases they encouraged people to take on loans they could not afford. Then there were the consumers who got too used to living on credit. Households had something like one credit card per person and each credit card had something like $20,000 debt on them. All this was very well when people the ability to make their monthly payments - it kept the system ticking over. But then, this system was unsustainable. Before you knew it, people were defaulting on their mortgages and the banks did not have money to lend any more. When the banks did not have money to lend to businesses, the businesses could not afford to hire people, who turn did not have any money to spend on goods and services that drove the businesses. So before you know it, the whole system is scrambling for money that it does not have. Hence you have recession. Since the US was the first place for things to go wrong, allot of this has had a knock on effect on the rest of us. Asia is an example. Asian, including China used to make things and sell them to America. Then, using the dollars we made, we would lend it back to the USA for them to buy our manufactured goods. However, the Americans are no longer buying things and so, the rest of us need to find new customers in order to keep our economies moving and hopefully help the American and European economies move out of this mess.

Hmm, by now I have known some more about the economic crisis...Thank you!!!