Final answer:
The 2008 financial crisis, marked by a dramatic collapse in global housing markets and resulting credit freeze, led to a surge in demand for safe assets such as Government of Canada Treasury bills. The interconnected nature of global finance meant that the crisis had wide-reaching impacts, including job losses and bailouts across various nations.
Step-by-step explanation:
During the credit crisis of 2008, the world witnessed a global financial meltdown that originated from a burst housing bubble in the United States, leading to a multi-trillion-dollar decline in home equity. As credit availability froze and consumer spending declined, many global financial institutions faced the threat of bankruptcy due to their investments in mortgage-backed securities and related instruments. The resulting economic downturn, known as the Great Recession of 2008, led to massive job losses, and governments around the world had to intervene with bailouts for the banking and automotive industries.
In response to growing uncertainty, investors sought the safety of government securities, such as the Government of Canada Treasury bills, which saw increased demand. This surge in demand caused Treasury bill prices to rise and their yields to fall. The crisis highlighted international dependence on the U.S. economy as nations that experienced similar speculation in housing, like Iceland, Ireland, and Spain, also faced credit freezes and subsequent recessionary pressures.
The economic ramifications of the crisis were far-reaching, affecting international trade, leading to the fall of the Dow Jones average, and causing retirees to flood back into the job market. The period of economic distress made it clear how intertwined global financial markets had become, and the importance of maintaining stability within them to avoid ripple effects worldwide.