This essay analyzes the 2008 Great Recession, examining its causes, including the US housing bubble, easy loan policies, and the repackaging of bad loans. It discusses the role of the 'Great Moderation' in fostering complacency and the subsequent liquidity crisis in banks. The essay also explores why the recession lasted so long, referencing the paradox of thrift and the zero-lower bound on nominal interest rates. Furthermore, it examines the recession's impact on macroeconomic theory, highlighting the discrediting of traditional paradigms like the IS-LM model and the increased focus on integrating financial factors into macroeconomic analysis. The conclusion emphasizes the need for continuous review of monetary policy, stricter lending practices, and proactive government intervention to prevent future crises.