Macro-Economic Policy. Examine The Aims And Policy Objectives

939 WordsJan 19, 20174 Pages
Macro-Economic Policy Examine the aims and policy objectives which UK Governments have used from the “credit crunch” of 2008 – up to the present time. How effective have they been? And how far has the global economy restricted (or otherwise) the Government response. In this essay I will examine the UK Government aims and policies that they used to tackle the 2008 “credit crash”. I will also discuss the purpose of economic policy making and how that effects the global economic environment. It is useful to define Monetary and Fiscal policy. Monetary policy involves changing the interest rate and influencing the money supply. It is usually carried out by the central bank and monetary authorities. This involves setting base interest rates…show more content…
It wasn 't long before things started to move just as the cheap money wanted them to. This environment of easy credit and the upward spiral of home prices made investments in higher yielding subprime mortgages look like a new rush for gold. The Fed continued slashing interest rates, emboldened, perhaps, by continued low inflation despite lower interest rates. In June 2003, the Fed lowered interest rates to 1%, the lowest rate in 45 years. The whole financial market started resembling a candy shop where everything was selling at a huge discount and without any down payment. "Lick your candy now and pay for it later" - the entire subprime mortgage market seemed to encourage those with a sweet tooth for have-it-now investments. Unfortunately, no one was there to warn about the tummy aches that would follow. (For more reading on the subprime mortgage market, see our Subprime Mortgages special feature.) But the bankers thought that it just wasn 't enough to lend the candies lying on their shelves. They decided to repackage candy loans into collateralized debt obligations (CDOs) and pass on the debt to another candy shop. Hurrah! Soon a big secondary market for originating and distributing subprime loans developed. To make things merrier, in October 2004, the Securities Exchange Commission (SEC) relaxed the net capital requirement for five investment banks - Goldman Sachs (NYSE:GS), Merrill Lynch (NYSE:MER), Lehman Brothers, Bear Stearns and
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