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The impact of the financial crisis on the global economy
Financial crisis of 2007-08
Financial crisis of 2007-08
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Why do you think India remained relatively insulated from the financial crises? "The contagion is truly global in a globalized world. How can the high priests of globalization in India expect to insulate the country from this all-pervasive crisis?" - By S. Shivaraman It is not right to say that a country is insulated from financial crisis in today’s globalized world. In some way or the other there will be an effect of failed programme of one country on the other. The moment we say that we are global (global meaning when we do not have any restriction on transactions with other geography’s), we become non-insulated to the financial crisis. Though the effect can come after one month or can also effect after one year or two, but it is certain that it will have some effect for sure. For example, auto industry affected in the west will have its effect on the IT industry in India. There exists a cyber-mastic effect on economies related in the globalized world. “The financial crisis in the US, the worst since the Great Depression of 1929, is threatening to reach perilous proportions. The collapse of the big five financial giants on Wall Street — Fannie Mae, Freddie Mac, AIG, Lehman Brothers and Merrill Lynch — with revenues totaling nearly $322 billion in 2007, followed by two of the largest banks — Washington Mutual (WaMu) and Wachovia — has sent shock waves through global financial markets” . Talking about the financial crisis in the U.S., which does not have a major effect on the India economy where India has a sound regulation system in the country. The regulatory system makes the country immune from the effect of financ... ... middle of paper ... ...ith the confidence that it can cope with the world from a very secure base” . Works Cited S. D. Naik , Business Daily from THE HINDU group of publications Wednesday, Oct 15, 2008 Ibid-1 Nupur Gupta, blog, wordpress.com, March 14th 2010 (http://nupurgupta.wordpress.com/), last visited on 22nd may Ibid-3 Ibid-3 Ibid-3 http://www.moneyworks4me.com/How-Sub-prime-Crisis-affected-Indian-Economy.html http://theviewspaper.net/financial-crisis-how-india-got-away-lightly/ http://www.asia-pacific-action.org/node/210 Ibid-8 Ibid-8 Ibid-7 Id-9 Id-9 http://www.newkerala.com/topstory-fullnews-29679.html Jayati Ghosh, The Global Financial Crisis, Developing Countries and India, THE GLOBAL CONTEXT,page-19 Shashi Tharoor, How India Survived the Financial Crisis, http://www.projectsyndicate.org/commentary/tharoor23/English
The financial crisis of 2007–2008 is considered by many economists the worst financial crisis since the Great Depression of the 1930s. This crisis resulted in the threat of total collapse of large financial institutions, the bailout of banks by national governments, and downturns in stock markets around the world. The crisis led to a series of events including: the 2008–2012 global recessions and the European sovereign-debt crisis. The reasons of this financial crisis are argued by economists. The performance of the Federal Reserve becomes a focal point in this argument.
The year 2008 was a very scary one for anyone involved in the US stock market. Due to subprime lending, and cheap mortgages, the housing market became grossly overinflated. Naturally, as with a balloon that’s filled too much, it “popped”. The resulting collapse of the housing bubble had severe implications for the rest of the US economy, housing, and related industries such as lumber, construction, and realty all came crashing down, and the people employed in those fields soon found themselves out of work. As with the stock market crash of 1929, fear of the economic instability caused people to pull their money out of any investments they had. This can be a problem for a healthy bank, being unable to supply the money people are requesting if it’s tied up in loans. However, this would prove to be an even bigger problem if the money never existed in the first place, and would take down one of the largest scams in American history.
The global financial crisis affected the many advanced economies, particularly the United States. Unemployment significantly increased, people were evicted from their homes, and the search for employment was a dead end. However, Canada was not affected by the same force as the United States: “Canada’s financial sector was less affected than most advanced economies and it had the highest bank soundness rating in the World Economic Forum surveys from 2007-2008 through 2012-2013.” Despite the relatively stable status of the Canadian economy, Canada was very much involved in the review and improvement of international financial regulations. Canada was in a position to make changes to financial regulations due to their perceived experience in the matter, as Canada escaped the crisis relatively unscathed.
Investment banks, Rating agencies and Insurance companies are key components of the financial market. In this presentation, I’m going to explain how these three key roles worked together to create the 2008 financial crisis.
After the HS Holdings incident when James contacted Ashok in India, then only he came to know about the reasons behind those low ratings. He realised that the meeting times were not perfectly suitable for the India...
The "subprime crises" was one of the most significant financial events since the Great Depression and definitely left a mark upon the country as we remain upon a steady path towards recovering fully. The financial crisis of 2008, became a defining moment within the infrastructure of the US financial system and its need for restructuring. One of the main moments that alerted the global economy of our declining state was the bankruptcy of Lehman Brothers on Sunday, September 14, 2008 and after this the economy began spreading as companies and individuals were struggling to find a way around this crisis. (Murphy, 2008) The US banking sector was first hit with a crisis amongst liquidity and declining world stock markets as well. The subprime mortgage crisis was characterized by a decrease within the housing market due to excessive individuals and corporate debt along with risky lending and borrowing practices. Over time, the market apparently began displaying more weaknesses as the global financial system was being affected. With this being said, this brings into question about who is actually to assume blame for this financial fiasco. It is extremely hard to just assign blame to one individual party as there were many different factors at work here. This paper will analyze how the stakeholders created a financial disaster and did nothing to prevent it as the credit rating agencies created an amount of turmoil due to their unethical decisions and costly mistakes.
If financial markets are instable, it will lead to sharp contraction of economic activity. For example, in this most recent financial crisis, a deterioration in financial institutions’ balance sheets, along with asset price decline and interest rate hikes increased market uncertainty thus, worsening what is called ‘adverse selection and moral hazard’. This is a serious dilemma created before business transactions occur which information is misleading and promotes doing business with the ‘most undesirable’ clients by a financial institution. In turn, these ‘most undesirable’ clients later engage in undesirable behavior. All of this leads to a decline in economic activity, more adverse selection and moral hazards, a banking crisis and further declining in economic activity. Ultimately, the banking crisis came and unanticipated price level increases and even further declines in economic activity.
[6] Kripalani, Majeet & Egnardio, Pete. The Rise Of India. Business Week Online. December 8, 2003. http://www.businessweek.com/magazine/content/03_49/b3861001_mz001.htm
Subramanian, Arvind. India’s Economy is stumbling? The New York Times. August 31, 2013: A19. Print.
The recent Global Financial Crisis (GFC) initially began with the collapse of credits and financial markets, which caused by the sub-prime mortgage crisis in the US in 2007. The sub-prime mortgages were given to high-risk lenders (with bad credit history) who were in danger of defaulting, which eventually caused a global credit crunch, where the banks were unwilling to lend to each other. In October 2008, the collapse of the major financial institutions and the crash of stock markets marked the peak of this global economic slowdown (Euromonitor International, 2008).
Financial crises have influenced the os of financial markets in past. The most important the Great Depression in 1929-30, the 1970s inflation failures and the banking difficulties in the 1990s led to problems in the financial markets causing serious disturbance. The recent financial crisis which became known in 2007, though the roots were implanted much earlier, has been the worst situation financial markets have ever faced.
...nces discussed above. Right now, the global economic is recovering, but the study of reasons of the crisis still teaches many countries a lesson on how to build a solid financial system and how to deal with other macroeconomic problems.
Asian financial crisis in 1997 is a good example to demonstrate the globalisation as a single issue in one country will motivate a domino effect on other countries. Since the crisis stared in Thailand because of the fail in banking system, a political upheaval was triggered in South Korea and Indonesia. At the same time, financial centres in New York, London, Hong Kong and Tokyo were also affected in this crisis. During the crisis, global news agencies utilised the Internet and telegraph updating news to their home countries. Such as the Economist, Reuters and the Financial Times which ar...
“India was a latecomer to economic reforms, embarking on the process in earnest only in 1991, in the wake of an exceptionally severe balance of payments crisis”(Ahluwalia 2002).The idea being simple ,there was a need to ...