Dr. Mark Zandi: Moodys Chief Economist

How could a once-obscure lending category unleash the worst financial crisis since the Great Depression? How did the effects of the US subprime mortgage crisis spread around the globe? Faulty reasoning and greed created an environment that led up to the crisis, and laxity allowed it to spread.

To avoid a recurrence, homeowners, investors, and policymakers would do well to examine not only specific missteps, but also the deeper forces behind the crisis, including homeowner psychology, antiregulatory sentiment, and the technology that facilitates complex global lending.

The US economy has started to grow again, but how and when will it fully recover? Everything about the worst recession since the Great Depression was out of the ordinary.

The same is proving true of the recovery. Consumer spending, saving habits, credit markets, the composition of the labor force, the nation’s fiscal health, global trade dynamics – all were deeply rattled by global financial and economic developments. Layoffs have slowed considerably, but how long before the economy starts creating jobs?

Major financial institutions are no longer on the brink of collapse, but when will banks loosen the purse strings enough to allow small businesses to expand and hire?

And with the economy still dependent on massive government spending, how can policymakers eventually bring down the federal deficit to avoid runaway inflation without sending the economy into another downturn?