Economies of Scale

This fills a gap in introducing the reader to economical problems that were triggered due to this banking collapse such as macroeconomic problems. Which I will include in to paper to furthermore give the reader a more global approach in how the economy plays a significant role in our day to days lives.

            Most of the company’s strategy in remaining to be competitive is trying to differentiate and get over its rivals which has the intentions of realizing the preferred seller and will have the highest returns into the industry. Thus, the choice of the firm had been affected relatively to the minimum efficient scale and the major issues that had been tackled to this issue are the economies and diseconomies of scale and scope (Forgang and Einolf, 2007, p. 151).

The banking crisis of the late 2000s, often called the Great Recession, is labelled by many economists as the worst financial crisis since the Great Depression. Its effect on the markets around the world can still be felt. Many countries suffered a drop in GDP, small or even negative growth, bankrupting businesses and rise in unemployment. The welfare cost that society had to paid lead to an obvious question: ‘Who’s to blame?’ The fingers are pointed to the United States of America, as it is obvious that this is where the crisis began, but who exactly is responsible? Many people believe that the banks are the only ones that are guilty, but this is just not true. The crisis was really a systematic failure, in which many problems in the

The bankruptcy of Lehman Brothers and subsequent financial market crash ushered in a time where many financial service companies were bailed out because they were deemed “too big to fail”. This term describes the large, intertwined relationship that many of the top banking and finance institutions have on our economy, and the devastating consequences that would transpire if these institutions were allowed to fail and cease to exist. While controversial, bailing out banks and other financial institutions was absolutely necessary to maintain the economic integrity of our nation. Raising objections to the ethical nature of a business being “too big to fail” does not address the deep underlying issues that led to this sort of thing being a possible whatsoever. With this being said, the aspects

The budgetary emergency happened in light of the fact that banks could make excessively cash, too rapidly, and utilized it to push up house costs and conjecture on money related markets. With a large portion of 10 years' insight into the past, it is clear the emergency had numerous causes. The most clear is simply the agents—particularly the unreasonably overflowing Anglo-Saxon sort, who asserted to have figured out how to oust hazard when in truth they had basically forgotten about it (“Crash Course”, 2013). National brokers and different controllers likewise bear fault, for it was they who endured this imprudence. The macroeconomic scenery was imperative, as well. The "Incomparable Moderation"— years of low swelling and stable development—cultivated lack of concern and hazard taking. An "investment funds excess" in Asia pushed down worldwide financing costs (“Crash Course”, 2013). Some examination likewise entraps European banks, which obtained avariciously in American currency advertises before the emergency and utilized the assets to purchase dodgy securities. Every one of these variables met up to cultivate a surge of obligation in what appeared to have turned into a less unsafe world.

This essay will argue that the 2008 financial crisis has brought to the forefront of global political consideration what some economists have known for some time. This is that 1) The global financial system is inherently flawed and cyclical recessions are a product of its nature 2) The interconnectedness of the global financial system means macro-management cannot fully buffer an economy against these cyclical recessions 3) Policy has

Secondly, the business failures combined with the stock market crash was harmful for the banking

The impact of the financial crisis in 2008 is so far , it has resulted in various industries have revived a shock, even many large companies have been forced into bankruptcy.Inflation is a result of the decline in the quality of life, the weakening of people 's ability to pay. The outbreak of the financial crisis from the United States and then spread to the world,so this essay analyzes the reason of the US financial crisis, it is equally applicable to the countries in the world and take warning,that is the lack of supervision of financial institutions in the United States.

In regards to the Financial Crisis of 2007-2009, a few conceivable reasons can be taken into consideration. For instance, high consumer deficit, high corporate deficit, complex money related securities, transient subsidizing markets got to be vital, extensively feeble administrative/business sector controls, shortcoming in the share trading system, shortcoming in the housing business sector, as well as worldwide monetary shortcomings. Besides the previously mention examples, the untrustworthy conduct by budgetary organizations, the disappointment of the national bank to stop lethal home loans, and over-obtaining by consumers can also be incorporated and taken into account. The effect of the monetary crisis from the perspective of firms was that they confronted declining interest for their products. The organizations thought that it was hard to acquire reserves, in light of the fact that the banks' trust in them had declined. Moreover, the organizations confronted solid rivalry from outside organizations. The likelihood of bankruptcy lingered. From the point of view of investors, the crisis implied conceivable loss of stores and loss of avenues to contribute (Carbaugh, 2006). The financial specialists expected to hunt down more

The origins of the financial crisis can be attributed to multiple inter-related factors. The biggest single contributor of the crisis, however, was the practice of

In an economy which is globalized to such an extent it is difficult to know all the linkings, and the connections between events and institutions are often impossible to predict. Many countries in Eastern Europe, for instance, are still heavily reliant on Greek banks, and if those banks collapse the EU faces the risk of a chain reaction of financial turmoil that could easily spread to the rest of the global economy (TIME, June 29, 2015).

The cost of the 2008 financial crisis to the economy has remained under-examined, probably because of the difficulty in making related assessment. Many sectors are impacted by this financial crisis at different levels. I believe that banking sector may be most influenced. Over the short term, the financial crisis affected the banking sector by causing banks to lose money on mortgage defaults, interbank lending to freeze, and credit to consumers and businesses to dry up. For the longer term, the financial crisis impacted banking sector by spreading new regulatory actions internationally through Basel III and through the Dodd-Frank Wall Street Reform and Consumer Protection Act in the United States (Investopedia).

The crises showed just how interconnected the banking system is throughout the world. The Lehman Brothers bank closure in 2008 created a major financial crisis around the world due to its influence (The Economist, 2013). It took the government’s massive bail outs to prevent total collapse of the financial system and to some extent economic collapse of the country. This government action set a precedent and to some sent a message that the reckless action by the banks in the name of profit is fine because they now have a safety net. It is a good example of how the collapse of a big financial institution that has national and global influence can affect several interrelated firms to the detriment of the country’s economic interests. This paper therefore, examines the notion “too big to fail” in relation to banking.

In addition, we have the uncertainty of financial markets. Investment decisions are often made in a setting of uncertainty because, by the time the investment can yield a return, the conditions determining its profitability may have changed. Some unanticipated changes be hedged, especially those that are uncertain to occur because it is difficult or impossible to insurer; whatever an insurance company or an issuer of a credit default swap; to calculate a premium. The low probability events, which can trigger system is problems, are very difficult to guard against, especially when such as event is transmitted through a financial system as a result of the interconnectedness of firms. In light of those risks, where does this place a government which wishes to act in the best interests of its citizens. How does it reach the balance between stability and competition and innovation while avoiding systemic risks arising domestically or globally.

According to the work examined in this study the global recession that occurred in 2008 and 2009 was partially a result of the financial industry's failure to be responsible for the decision it made in using financial instruments that were risk and very complex in nature. The culture of corporations were constructed on risk-based rewards instead of rewards that resulted in value for stakeholders. The financial risks that banks took on were not well comprehended by the public or regulators and the mass media also failed to understand the risks that the banks had entered into with certain financial agreements.