Due to developing countries not being able to make any trades, countries then begin to see a dramatic change in the economy. The article “The Financial and Economic Crisis and Developing Countries” by Bruno Gurtner, explained the main causes of why developing countries are still going through the financial crisis phase. Bruno Gurtner simply states, “the crisis was transmitted primarily by trade and financial flows forcing millions back into poverty” (Gurtner, 2008). However, Gurtner discovered, since the financial crisis has been hitting developing countries hard, it begins to cause a regression in economic growth in those poor countries. Gurtner found that “Marco-economically the crisis manifested…in trade and payment balances, dwindling currency reserves, currency devaluations, increasing rates of inflation, higher indebtedness and soaring public budget deficits” (Gurtner, 2008).
Economic policies that have repelled foreign investment are a major factor in the economy’s stagnation. A growing debt burden, persistent inflation, and a poor business climate led to disappointing growth in 2001. However, in December 2001 the government voiced a renewed interest in economic reform, seeking advice from the IMF and other financial institutions (World 7). After independence, Uzbekistan tried to support inefficient state enterprises and shield consumers from the shocks of rapid economic reform. These policies eventually led to severe inflation and an economic crisis.
Hereby, the people and resources will be available to spur economic growth. 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.
Introduction This paper provides an in-depth review of the economic issues currently affecting the global economy. There was under performance in the global economy in last year across major developed economies. The financial crisis witnessed in the year 2008 saw many nations struggle to ensure that they recover their lost economic grounds, wrestling the challenges associated with adopting the necessary fiscal and monetary policy instruments. Despite the concerted efforts put to revive economies, there are massive economic crisis currently affecting many parts of the globe that need be addressed, otherwise the process of economic growth will stagnate. Some of the economic issues addressed in this paper include; Obamacare, economic sanctions and financial instability, employment and inflation rates, cyberspace issues, terrorism and economic growth.
By examining the nation’s economic struggles during this time period (2007-2009), it will conclude that the current macroeconomic situation deals with unemployment, which is a direct result of the recession. It can be argued that the economic hardships of the great recession began when interest rates were lowered by the Federal Reserve. This caused a bubble in the housing market. Housing prices plummeted, home prices plummeted, then thousands of borrowers could no longer afford to pay on their loans (Koba, 2011). The bubble forced banks to give out homes loans with unreasonably high risk rates.
A prominent example of economic policy as a result of global issues would be the decisions made by the UK government after the global financial crisis. Following a period of economic boom, a financial bubble burst this occurred on a global scale. This resulted in some of the world’s largest financial institutions to collapse. With the preceding recession, the UK government and many others resorted to large-scale bailout and rescue packages for the surviving banks and financial institutions and alternatively imposing harsh austerity measures on themselves to decrease economic spending. This recession saw governments globally lending large sums of money to funnel into the economy to ensure survival; this takes me on to the next example the issue of global debt.
Notably, when a financial crisis emerges, the liquidity rate for money reduces to a level where saving cannot help in salvaging the already worsened money situation. For instance, one of the most prevalent financial crises took place in 2008 when the global money market went through a massive recession period thus creating a huge economic fuss across the globe. In any situation of financial crisis, companies and businesses are often faced by the problem of ethical dilemma on how to react to the financial crisis at hand. These ethical dilemmas are brought about by the fact that the business might have several options on reacting to the situation that is responsible for the financial crisis. Basically, this research paper aims at exploring the threats that most users of financial information have gone through in divergent parts of the world over the recent past.
ECON 350 Review Essay ----Athanasios Orphanides' article " Is Monetary Policy Overburdened ?" Summary Introduction: After the global financial crisis, the economies of many countries were stagnant, some companies closed down, many people lost their jobs, and governments needed to spend much money to help these companies and unemployed people which caused large government debts, the banks also faced to bankrupt. All of these problems caused the governments wish the monetary policy can provide the solutions to recover the economy. The primary goal of monetary policy is to keep price stability which is very important for central banks, it could help central banks make the monetary policy process is apolitical and get the credibility and independence. But, the government's intervention of central banks to achieve the three public policy goals about full employment, fiscal sustainability and financial stability would politicized the monetary policy, increase the responsibilities of central banks which overburden the monetary policy, reduce the attention of keeping price stability and effect the credibility, independence and contribution of crisis management of central banks.
More stock would be purchased by the computers during which it also sold off stock index futures, when the market increased. Then, when the market went down, investors assumed that the portfolio insurance would shield them from losses. However, this didn’t work because investors should have sold as the market dropped and bought as it went up. Since there was a large number of investors that were doing this, market trends became exaggerated. The 2008 crisis started out similarly to the one in 1987.
Federal Reserve quantitative easing must be scaled back as it is re-inflating the housing bubble and recklessly propping up financial markets. The longer we wait, the bigger the eventual explosion will be. Quantitative easing (or just ‘QE”) is a program carried out by the US central bank, otherwise known as the Federal Reserve. It is an unconventional program designed to artificially stimulate markets in recessionary periods via printing new money into existence to buy up particular monetary instruments. Purchasing these instruments works to push the interest rates large banks pay the Fed down to nearly zero in order to loosen up credit (currently 0.25%), as well as push down yield rates on US treasury bonds in order to keep the interest on the US National debt feasible.