Globalisation and Trade 1.Discuss the Causes of the Great Recession of 2008-10.

1845 Words Aug 22nd, 2013 8 Pages
Globalisation and Trade 200541 Essay Questions: Due: Tutorial Week 9 (Word limit: 2,000) CHOOSE ONE
1. Discuss the causes of the Great Recession of 2008-10. Does the crisis represent a shift in the centre of global economic power from the United States to China? In your answer discuss the future fate of the US dollar as the preeminent international means of payments and reserve asset.

The great recession of 2008-2010 resulted from a combination of easy credit conditions during the financial boom of 2002-2008 which saw a change that lead to encouragement of high risk borrowing, lending practices, international trade imbalances and improper use of credit. The combination of these factors leads to industries requiring bail-outs by the
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It is important to note that this year has been projected from statistics used to study the relative decline of America and fast growth of China. It by no means projects of the decline of the US in the long run. The US even after this decline still holds a quarter of the world’s GDP. It would be hard to imagine a nation that relies on investment and international trade with the current economic leader by over taking it. China may yet be at a stalemate until proven that it can hold and invest their yield to correct their existing problems such as poverty, labour issues and push the Yuan value. If not then China will join Japan back at second place as expansion without productivity are only temporary. (Dewar 2012) This is not impossible task for China, it is most likely probable, but will take longer than the near future.

In order to see where the US dollar is going we have to analyse the current market and study the past. Since the fixed exchange rate system of Bretton Woods in 1971 there has been an explosive growth of international central banks, most of investments of such are invested in US dollars. The expansion of this particular reserve has opened trade imbalances in the past two decades from its constant use. (Eichengreen 2009). Although this is the case up until the financial crisis, some East Asian

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