# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Economic Tsunami

Written By
Paul Tracy
Updated January 16, 2021

What is an Economic Tsunami?

An economic tsunami is a set of circumstances that produce an event that triggers considerable distress in the financial markets and/or the economy.

How Does an Economic Tsunami Work?

In the meteorology world, a tsunami is a wave or series of waves caused by the movement of a large body of water. Typically, a tsunami can be tens of feet high and washes ashore, destroying buildings and killing many.

The 2008 subprime mortgage crisis that led to an economic crisis in the United States is one example of an economic tsunami. When homeowners continued to default on mortgages, the mortgage-backed securities based on those mortgages began defaulting, and the insurance companies that covered those securities could not cover the rising claims. Additionally, rising unemployment caused a drop in spending, which caused many businesses to go under or lay off more employees, worsening the crisis.

Why Does an Economic Tsunami Matter?

Though our example is a simplified version of the 2008 economic crisis, the point is that a series of displacing events created a few large waves that washed over the economy and left devastation behind. Eventually, the U.S. economy began to rebuild, and like many tsunami-afflicted areas, the new construction is often stronger than the last.

Ask an Expert about Economic Tsunami
At InvestingAnswers, all of our content is verified for accuracy by Paul Tracy and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Economic Tsunami.
Be the first to ask a question

If you have a question about Economic Tsunami, then please ask Paul.

Ask a question

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 2 million monthly readers.

If you have a question about Economic Tsunami, then please ask Paul.

Ask a question Read more from Paul

Read this next

Paul Tracy - profile
Ask an Expert about Economic Tsunami

By submitting this form you agree with our Privacy Policy

Share
close
Don't Know a Financial Term?
Search our library of 4,000+ terms