A Note On The Bailout Crisis

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The concept of a bailout is a loaded topic by itself, and its definition certainly does not give it any help. The words “failing,” “save,” and “collapse” are usually not associated with a light-hearted idea. When a company or a country’s economy is on the verge of collapse, chaos is not far behind. Job loss, bank’s individual trust, the stock market, and even each household’s net. worth is at stake, all of which leads to economic decline. During this time of panic, banks (commercial or central depending on the scale) must make a decision on whether or not they should save/bailout the company or economy. In many instances, especially when a country’s economy is about to collapse, other central banks are usually not seen to shy away…show more content…
Later that month, the U. S. House of Representatives passed legislation establishing the Troubled Asset Relief Program, or TARP. Congress then passed, and President Bush signed, the Emergency Economic Stabilization Act of 2008, which established the $700 billion Troubled Asset Relief Program (Investopedia). In November 2008, the Federal Reserve instituted quantitative easing programs following the 2007-2008 financial crisis; or QE as it has become known. Quantitative easing is the act in which central banks buy government bonds in order to promote economic growth. In November 2010, the Federal Reserve announced a second round of quantitative easing, referring to it as “QE2.” A third round again was later announced on September 13, 2013; which is now being referred to not as QE3; but “QE-Infinity.” Quantitative easing can only be carried out if the central bank controls the currency used in the country. Japan, the United Kingdom, Scandinavia and the Eurozone quickly followed, since enacting quantitative easing programs of their own (Randow). A central bank, reserve bank or monetary authority are all institutions that manages a state’s currency, money supply and interest rates. A central bank also has the authority to print the national currency. Central banks within countries in the Eurozone cannot unilaterally expand their money supply and therefore cannot directly employ quantitative easing. These countries must instead, rely
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