A financial collapse occurs when the value of financial assets plummets, leading to widespread economic instability. This can happen due to various factors, such as poor management, excessive debt, or external shocks like a recession. When a financial system collapses, it often results in bankruptcies, job losses, and a decrease in consumer confidence. Historical examples of financial collapses include the Great Depression in the 1930s and the 2008 financial crisis. These events highlight the interconnectedness of financial markets and the potential for a single failure to trigger a broader economic downturn, affecting individuals and businesses alike.