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The financial crisis of 2007-09
Financial crisis of 2007-08
The financial crisis of 2007-09
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In the final quarter of 2008 the world economy started a period of global economic slowdown, which became known as the “Great Recession”. The situation is especially severe in the Eurozone countries. “In 2010, Greece’s GDP dropped from 235 billion euro to 230 billion euro, a 4.5% decline and the unemployment rate hit a record high of 28% in the last quarter of 2013 making it the country’s worst recession since 1974.”(Tsafos, GDP) As a result it led to a passing of a series of policies which the goal is to reduce the government budget deficit that became known as the “Austerity Measures”. Austerity measures attempt to reduce government budget deficit by increasing tax and cutting public services such as reducing the number of government employee and cutting health care. However the passing of the Austerity plan caused public outrage due to the fact that the plan had result in high unemployment rate. In order to recover from an Economic Recession both the government and its people need to have the patient to fix the issue step by step because the process of recovering from an Economic recession is long and tedious.
The European Union recession recovering process started with the forming of the European Financial stability Facility, also known as the EFSC. The EFSC was created on May 2010 by 27 member states of the European Union with the purpose of safeguarding financial stability in Europe. In a CNBC article Mark Koba states the action that the EFSF take to help improve the economic conditions in the Euro Zone: “The EFSF issues bonds or other debt instruments to provide loans to the countries who need them. The loans are guaranteed by other states in the euro zone.” (Koba, CNBC) After a nation apply for a loan the inte...
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...e end of humanity might come from the hand of natural disaster, but in fact the demise of humanity can come from our own hands. The time when people only worry about their own benefit and stop trusting each other is the beginning of an end.
Works Cited
Blodget, Henry. "IT'S OFFICIAL: Cutting Government Spending Is Hurting Our Economy ." . Business Insider, 27 Feb. 2013. Web. 9 May 2014.
Daley, Suzanne . "Greece’s Aggressive Pursuit of Tax Evaders Appears to Collect More Anger Than Money.". New York Times, 28 Oct. 2013. Web. 9 May 2014.
Koba, Mark. "EFSF: CNBC Explains." . CNBC, 20 Oct. 2011. Web. 9 May 2014.
Krugman, Paul. " The Conscience of a Liberal Why Devalue." . New York Times, 1 May 2010. Web. 9 May 2014.
"Tax Cuts." . Money Chimp, n.d. Web. 9 May 2014.
Tsafos , Nikos . "Greece’s GDP in 2010 ." . Greek Default watch, 12 Apr. 2011. Web. 9 May 2014.
Gerson, Michael . "The real-world effects of budget cuts." The Washington Post 7 Apr.2011: n. pag. Print.
The Strange Death of Liberal America. New York: Praeger Publishers, 2006, pp. 113-117. 216. The 'Standard' of the 'Standard'. Carr, David.
Every few years, countries experience an economic decline which is commonly referred to as a recession. In recent years the U.S. has been faced with overcoming the most devastating global economic hardships since the Great Depression. This period “a period of declining GDP, accompanied by lower real income and higher unemployment” has been referred to as the Great Recession (McConnell, 2012 p.G-30). This paper will cover the issues which led to the recession, discuss the strategies taken by the Government and Federal Reserve to alleviate the crisis, and look at the future outlook of the U.S. economy. 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.
"World Socialist Web Site." GDP, Consumer Spending Contract as US Plunges into Recession -. N.p., n.d. Web. 04 May 2014.
Bullock, Alan, and Maurice Shock, eds. The Liberal Tradition: From Fox to Keynes. Clarendon Press, 1967.
Revival following the crisis just when the vulnerabilities in the financial sector have been addressed without endangering the fiscal sustainability. The crisis resolution actions generally involve costly government reorganization of private sector’s and the financial sector’s balance sheet. This can have a long-term negative effect on the public debt levels. Besides,
Amadeo, Kimberey. "How Much Did Hurricane Katrina Damage the U.S. Economy?." US Economy. N.p., 31 Oct. 2012. Web. 19 Apr. 2014.
Barro, Josh. "What Is the Fiscal Impact of Gay Marriage?" Bloomberg.com. Bloomberg, 26 Mar. 2013. Web. 20 Feb. 2014.
Historically, financial crises have been followed by a wave of governments defaulting on their debt obligations. The global economic history has experienced sovereign debt crisis such as in Latin America during the 80s, in Russia at the end of the 90s and in Argentina in the beginning of the 00s. The European debt crisis is the most significant of its kind that the economic world was seen started from 2010. Financial crises tend to lead to, or exacerbate, sharp economic downturns, low government revenues, widening government deficits, and high levels of debt, pushing many governments into default. Greece is currently facing such a sovereign debt crisis and Europe’s most indebted country despite its surplus in the early 2000s. Greece accumulated high levels of debt during the decade before the crisis, when the capital markets were highly liquid. As the crisis has unfolded, and capital markets have become more illiquid, Greece may no longer be able to roll over its maturing debt obligations. Investment by both the private and the public sectors has ground to a halt. Public sector debt has increased substantially as the state had to rely on official assistance to payroll expenses, fiscal deficit and fund social payments.
"Europe must prevent Greece from becoming an out-and-out catastrophe and make sure that the same fiscal 'remedy' is not applied to other weak economies" -- MEP, Franziska Brantner.
The Web. The Web. 23 Jan. 2014. Cassidy, John. The.
In time of economic crisis the government has a choice to cut spending or increase spending for public goods and services. “In 2009, Congress passed the American Recovery and Rein- vestment Act, which authorized $787 billion in spending to promote job growth and bolster economic activity”(Stratmann/Okolski 3). John Maynard Keynes, an economist of 20th century, suggest that the government should run a deficit if it will create jobs and increase capital gain. This theory support the current stimulus package that has been introduce during President Obama’s term. Although the flaw with this concept is that it makes the assumption the government has done studies and understands which areas needs the funding the most and knows where it will be beneficial, realistically that is not true. “Federal spending is less likely to stimulate growth when it cannot accurately target the projects where it will be most productive” (Stratmann/Okolski 2). This can be seen because political figures will spend money where it directly supports their needs as well. For instance, the political figure would rather spend money to things that will yield a p...
Web. The Web. The Web. 14 May 2014. Stanley, Jay.