Global pandemics

The webs of debt and credit have always been fragile in times of panic, spreading problems from one part of the global economy to another. The reason is that: when one link in the very elaborate chain breaks and defaults on some debt, it can leave creditors dangerously short of funds, unable to guarantee the credit of other firms. In this way, the consequences of one failure can spread throughout the entire money market.

When Lehman Brothers failed, the hundreds of billions of dollars in short-term debt it had issued became worthless, triggering panic among the various investors and funds that held it.

A classic mechanism for spreading crises is the otherwise unremarkable fact that investors in multiple countries hold identical assets. When the bubble behind the securities popped, investors worldwide simultaneously saw their portfolio go up in smoke. Invariably, they curtailed credit, hoard cash and triggered a panic.
About half of the securitized sausage made on Wall Street--CDOs and MBS--were sold to foreign investors. The largest portion of these securities ended up in the asset portfolios of European banks and their subsidiaries.

The loss sustained by these banks caused considerable collateral damage to the corporate sector in Europe. Unlike American firms, which rely more on capital market for their financing, European firms depend heavily on bank financing.

The subsidiaries of European banks had pumped significant amounts of credit into emerging European countries like Ukraine, and once the parent banks suffered massive losses, they became risk averse and withdraw credit across the board, starving their foreign subsidiaries. The resulting collapse of credit in emerging Europe helped plunge these countries into recession.

Normally banks issue "letters of credit" to guarantee that goods in transit from China to US will be paid for when they reach their final destination. Once the credit markets seized up, banks stopped providing this essential financing.

Commodities and currencies: page 123, read 124 for capital flight

page 126 for reason why housing prices go up.
Low savings and high investment rates implied that the current account balance---the difference between a country's total savings and its total investments---was veering into negative territory. Countries that run a deficit need savings from other countries to underwrite their investments.

Reasons of the financial crisis:
Housing bubbles; An overreliance on easy money and leverage; an embrace of high-risk assets and financial innovations

Similar crisis occur in different places with synchronization because of shared weaknesses.