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What are the factors causing the 2008 global financial crisis and its consequences
What are the factors causing the 2008 global financial crisis and its consequences
Causes of financial crisis essay
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In the late 2000s, the World suffered from a big global economic crisis which caused “the largest and sharpest drop in global economic activity of the modern era”, in which “most major developed economies find themselves in a deep recession”, according to McKibbin and Stoeckel (1). Because its consequences have a very big impact to the whole world, many economists and scientist have tried to find the causes of the crisis; and some major causes have been emphasized are greed, the defection of the free market system, and the lack of prudent regulation and supervision. This essay will focus on the global imbalances, one of the most important causes of the current economic crisis. Many researchers have pointed out that the global imbalances are the root of the recent financial crisis. Portes claims that “the underlying problem in international finance over the past decade has been global imbalances, not greed, poor incentive structures, or weak financial regulation, however egregious and important these may be.” (2). According to him, the global imbalances lead to “the increasing in dispersion of current account”, which “puts a burden on financial systems to intermediate.” In 1996, the US current account and emerging market plus developing country current account were each about zero. In 2008, US current account was in deficit by $ 600 bn, the emerging market/developing country current account in surplus by $ 900 bn. (sect. 1.1) Moreover, the global imbalances also make capital flowing incorrectly, from developing countries to advanced countries, from advanced countries to other advanced countries. This makes developing countries with fast productivity growth show capital outflows and vice versa, leads to the surplus of developing... ... middle of paper ... ...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. Works Cited Ferguson et al. International financial stability. Geneva: International Center for Monetary and Banking Studies, 2007. Print. Warwick J. McKibbin, and Andrew Stoeckel. “The Global Financial Crisis: Causes and Consequences.” Lowy Institute for International Policy 2.09 (2009): 1. PDF file. Richard Portes. “Global imbalances.” London Business School and CEPR (2009): 2. PDF file. Warwick J. McKibbin, Andrew Stoeckel, The Potential Impact of the Global Financial Crisis on World Trade http://www-wds.worldbank.org/external/default/WDSContentServer/IW3P/IB/2009/11/18/000158349_20091118083139/Rendered/INDEX/WPS5134.txt
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.
report of the national commission on the causes of the financial and economic crisis in
Shahrokhi, M. (2011). The global financial crises of 2007-2010 and the future of capitalism. Global Finance Journal, 22, 193-210. doi: 10.1016/j.gfj.2011.10.010.
In The Return of Depression Economics and the Crisis of 2008, Paul Krugman warns us that America’s gloomy future might parallel those of other countries. Like diseases that are making a stronger, more resistant comeback, the causes of the Great Depression are looming ahead and much more probable now after the great housing bubble in 2002. In his new and revised book, he emphasizes even more on the busts of Japan and the crises in Latin America (i.e: Argentina), and explains how and why several specific events--recessions, inflationary spiraling, currency devaluations--happened in many countries. Although he still does not give us any solid options or specific steps to take to save America other than those proposed by other economists, he thoroughly examines international policies and coherently explains to us average citizens how the world is globalizing--that the world is becoming flatter and countries are now even more dependent on each other.
Cabral, R. (2013). A perspective on the symptoms and causes of the financial crisis. Journal of Banking & Finance, 37, 103-117
Ott, M. (n.d.). International Capital Flows. Library of Economics and Liberty. Retrieved June 9, 2011, from http://www.econlib.org/library/Enc/InternationalCapitalFlows.html
This paper provides an overview of the crisis, outlines the major causes of the crisis, examine alternative solutions to the problem
Weiss, M.A. (2009) ‘The Global Financial Crisis: The Role of the International Monetary Fund’, CRS Report for Congress.
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).
Pearlstein, Steven. "Understanding the Asian Economic Crisis." Washingtonpost.com: Asian Economies Report. Washington, D.C.: Washington Post, 18 Jan 1998. 30 Nov 2001 <http://www.washingtonpost.com/wp-srv/business/longterm/asiaecon/stories/asiaecon11898.htm>.
Economist Raghuram Rajan was one of the prophetic ones at the central bankers conference where Alan Greenspan was present in 2005 and delivered his paper asking, “Has Financial Development Made the World Risker?” The answer to this question in Rajan’s head was yes, but all other critics it was no, however more recent events; that of the 2008 crisis has proved him correct.
Velde,D.K (2008). The global financial crisis and developing countries. Available at: http://www.odi.org.uk/resources/download/2462.pdf (Accessed: 5th August 2010).
As stated earlier, this global financial crisis that superficially seems to be causing only negative effects on the global economy, also caused positive effects in global economy in the long term. This was a pivotal event in the global economy and beneficial opportunity to evaluate global economy and pro...
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). Although, Gurtner have his own beliefs about how the financial crisis effects the developing countries, however, in the article “Financial Crises: Explanations, Types, and Implications” Stijn Claessens and Ayhan Kose have different beliefs about financial crisis and developing countries. Claessens and Kose simply explain “financial crisis is often associated with…substantial changes in credit volume and asset prices; severe disruptions in financial intermediation and the supply of external financing to various actors in the
The global economy is a complex and multi-faceted system. When one variable changes, such as a dramatic increase in the New Zealand dollar; the spin-off effects can be detrimental to some while increasing the wealth and living-standard of others. This essay will discuss the global economic system we have in place today, and the consequential distributive injustices as a result of this structure.