Economic Meltdown

2698 Words11 Pages
1.0 Introduction The 2007 collapse of the U.S. housing market and the worldwide economic damage that followed in 2008 and 2009 made people know the term "economic meltdown" (ehow.com, 2011). And the year 2011 proved to be a epic one in world history and brought dramatic change to many parts of the world - change that require cautious and serious analysis. International developments since World War II have drawn the nations of the world closer together in a global economy in which labour and capital move across borders. When an economic crisis in one area spreads around the world, a global meltdown may result. The global financial crisis originated with the collapse of the U.S. housing market, as many sub prime borrowers defaulted on…show more content…
The crisis has hit European economies unprecedentedly hard and its effects have occurred in two phases. The first phase is the economic recession following the global economic downturn. The second phase is the so-called sovereign debt crisis which started in Greece firstly and then appeared in Ireland and Portugal. Like many other countries and organizations, European Union (EU) has also developed strategies in order to tackle the challenges of the crisis (Yurtsever, 2011). 4.0 Effects As a result of a global economic crisis, banks and financial institutions sharply limit lending. Consumers, fearing further economic damage, spend less, and firms begin sacking workers. The economic downturn has brought more middle-class customers to the loan windows. But the real change in pawning has to do with the skyrocketing price of gold. With gold at $1,500 an ounce, pawnshops are making easy profits by buying gold jewelry and selling it to refineries. For sellers, those gold cufflinks languishing in a jewelry box might now cover several weeks’ worth of groceries. A global economic meltdown creates worldwide recession or depression conditions in which output declines, unemployment rises and credit becomes difficult to access. With the introduction of the current global financial crisis in the aftermath of the US housing market failures, everyone has shifted their attention to the extreme dependence structure of financial markets (Aloui,
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