Essay about The Global Financial Crisis of 2007

Essay about The Global Financial Crisis of 2007

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The 2007 financial crisis, a “once in a century event” a crisis congruent to The Great Depression, has continued to puzzle scholars and economists alike. A crisis of American origin, had the ability to spread rapidly across the world and affect both developed and emerging market economies simultaneously. It is a trite but no less true observation that a lack of a global system of regulation was a main cause of the inception and contagion of a crisis on a global scale. An analysis of the preceding events reveals the global financial crisis as complex by which underlying systemic flaws manifested in the context of an increasingly integrated, global financial market.

The 1990’s marked a period of prolonged economic boom for the United States. (Brunnermeier, 2009, 77-100) Interest rates were low, which increased investments in subprime mortgage loans- made possible through the mechanism of securitisation. The “U.S. housing bubble” grew as inflows of hot money from domestic and overseas investment funds poured into the U.S housing market, which is arguably the main mechanism by which the crisis spread. The inevitable collapse of the housing bubble as those securities commenced in decreasing value, banks in the U.S. and in foreign countries began to fail. The total cost incurred by the global financial crisis is estimated by the International Monetary Fund (IMF) at $11.9 trillion, while estimates of global bank losses currently stand at $3.4 trillion. (Evans, Jones and Steven. 2009) It was these failures which spurred systemic banking crises in many countries around the world. US Congress Oversight Panel report (August 2009), “Troubled assets were at the heart of the crisis that gathered steam during the last several years and erupt...

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Peliez, Carlos M. (November 2009). Financial Regulation after the Global Recession . [Online] Available at: (Accessed: 4 May 2014).

Shinjiro, H. Crises of Global Economies and the Future of Capitalism : Reviving Marxian Crisis Theory, In Routledge Studies in the Modern World Economy.Hoboken : Taylor and Francis. 2012,

Sim Stuart , Addicted to Profit : Reclaiming Our Lives From the Free Market, Edinburgh : Edinburgh University Press. 2012.

Willke Helmut, Willke Gerhard, Political Governance of Capitalism : A Reassessment Beyond the Global Crisis , Cheltenham : Edward Elgar Pub. 2012

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