How long will this last?

What caused the global financial crisis? and...
When will it end?
Unsurprisingly, this is still one of the most prominent questions concerning the current economic crisis. The Credit Crunch has given way to the Global recession, and so it is the longevity of the recession that I will attempt to address, along with the other crucial question about it's causes.

Causes:
There are probably numerous directions in which we could point the finger of blame, but our propensity to spend without proper accountability both in micro and macro-economic terms, is I feel, at the root of the crisis.
There has been an over-growth of the worlds economies funded by debt, secured largely on property. If you take a look at the rise in the price of property over the last 10 years
(there's a graph of UK property prices here:)
The steep rise between 1995 and 2005 is blatantly unsustainable, but neither home-owners nor politicians really wanted to face up to it. This period heralded an unprecedented drive to convert this property capital into cash by re-mortgaging. This capital was then released into the economy as if it were revenue (which is was not!), by this I mean consumers spent it as if it were pocket money.
The result was bloated profits throughout the economy funded in the main by the over-inflated property market. Retail companies were taking these funds through their tills assuming that this level of retail was sustainable and therefore could be built on as a revenue-model for future growth. These profits were channeled into buying out companies and expanding, expanding, expanding until...BANG! the property market stalled and the bubble burst.
Suddenly all this expansion (built on a wing and a prayer so to speak) had over-exposed some big companies, in turn the banks were exposed (they funded the expansion) and the growth that was meant to continue, not only stopped, but has begun to go negative (recession = sustained shrinkage of GDP).
During this giddy growth period, the banks had indulged in some extremely suspect activity to amass 'assets' in the form of debt - in particular sub-prime mortgages which they bought with little thought of whether they had any real worth - these mortgages were only good whilst the market was growing (as the houses could be sold to recoup the debt). In a falling market, these 100% mortgages were losing value hand over fist, the banks' reserves were decimated leaving them calling in loans. Many of these loans were in the form of a normal operating overdraft for many of these expanding companies - removal of these operating funds left them looking for cash quickly. Exposed companies that had over-stretched themselves now had to sell off assets to pay the banks or risk going into administration.
A massive hole developed in the banks funds (I have lumped all banks together for ease of reference) and a lot of big companies fell into that hole, many of them having to sell out, make masses of redundancies and in many cases cease trading (even some of the banks got pulled into the same vacuum).

How long will it last?
A big, big question, which in truth, no-one knows the answer to - anyone who thinks they have an answer to this question is just guessing (me included), after all if this is deeper than recessions we are used to seeing, then we don't have a model against which to measure.
The crisis will continue until the world economies stabilise and can start to show some small amount of growth again - many commentators believe this will be at the end of 2010, beginning of 2011. Governments and trade associations have consistently underestimated the recession and have tried to 'talk it up':
The truth is somewhat more depressing, there will be a lot of knock-on effects until all the knock-ons are exhausted.
EG: If the motor trades collapse (they will certainly suffer), then the dealerships and garages suffer - the toolmakers suffer, the trade suppliers for plastic mouldings, air conditioning, upholstery, bulbs, sat-nav systems etc.. etc.. all suffer. Each local economy that is supported by large factories in any of these areas collapses taking all the local traders down (food outlets, clothing outlets, electronics retailers etc....) The down-turn in lots of individual areas takes down national retailers, big food chains, fast food outlets, media retail companies - the list is endless... When all these houses of cards have fallen, it will be up to the remaining industry to show an upturn, needless to say the deeper the recession the harder it will be to show any sort of upturn. If you can comprehend these facts then you should be able to see that this is not going to be resolved quickly.
In short: Two years - if we are not out of the woods in two years, we should at least have a good idea of when we will be on the road to recovery... we have never experience this type of recession (which may well end up being identified as a 'depression' in the fullness of time), in the advanced global financial markets that we have in place today - the market has changed out of all recognition since the last recession of this magnitude was upon us, therefore we wait and see...

Related posts:
Is this the new Great Depression?
Sub-prime mortgages to blame?
How long will the credit crunch last?
Is there really a credit crunch?