How did the whole recession happen ?

In the US, people were buying homes and other things they could not afford, and doing it on credit. Well, eventually many people have lost their homes because they bought more than they could afford (stupid) and the banks loaned them the money to do it (even more stupid). So those homes were foreclosed on, and the property values have declined, and the banks have lost huge amounts of money on these homes. The way people were able to keep borrowing money to keep buying what they couldn't afford was by taking home equity lines of credit, but now many people's homes are worth less than what they paid for them, so they can't borrow anymore. So those people are not buying. When a lot of people can't buy stuff anymore, businesses go out of business, and people lose their jobs. Then THOSE people don't have any money to buy stuff, either, and it just keeps going on and on. That is basically what has caused this economic crisis. In addition, the banks lost so much money, a lot of them went bankrupt, and the ones left solvent are refusing to loan money to anyone, so other businesses are going under because the way they kept their cash flow going was to borrow money sometimes. So even businesses that are doing sort of OK are having trouble because they can't borrow money. High gas prices just made people even less able to afford their homes, but these forclosures would have happened anyway (and still are, even though gas prices fell).

This economic crisis is the fault of many people, including consumers who bought more than they could afford & didn't know how to do the math to figure that out. So I personally think math illiteracy and the inability of people to defer gratification (save for what you want, don't put it on credit, don't keep up with the Jones) has most to do with it.