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Last Updated: Tuesday September 30 2008 15:16 GMT

World caught in huge cash crisis

Graphic showing banks all over the world

Stories about money problems in the UK have been hitting the headlines for weeks, but now the whole world seems to be in the middle of a huge cash crisis.

It might seem odd, but it's all to do with banks running out of money.

As well as lending money to people and businesses, banks around the world have always lent cash to each other too.

But too many American banks lent money to people who couldn't pay it back, which means some banks have now run out of cash and can't lend to each other.

As a result, the global financial system has almost come to a standstill.

Graphic showing a $700 billion sign
Things were supposed to improve on Monday night, after America came up with a rescue plan.

The idea was for the American government to give a staggering $700 billion (380 billion) to stop banks over there running out of money and help them start lending to each other again.

Bankers thought this would help to sort everything out.

But loads of people thought it was the banks' fault they'd ended up in a mess and didn't think it was a good idea to give them loads of cash - especially as it would be coming from some of the taxes ordinary Americans have to pay.

In the end, American politicians said no to the rescue plan, but now financial people aren't sure what to do next and they're worried things could get a lot worse.

Solution

Bread
But how does all this affect you? Well, if banks don't have enough money, everyone feels the pinch.

Some companies can't survive without being able to borrow money, which means people could lose their jobs.

It's also harder for ordinary people to borrow cash to buy big things like a home or a car.

That's why everyone wants a solution to this crisis fast - and all eyes are on America to see if they can come up with one.