The 2008 Financial Crisis Essay

Have banks responded to the public accusation that the 2008 financial crisis was caused by a “crisis of character” in their industry by actively seeking candidates of integrity and character?

The 2008 US financial crisis triggered global economic shocks, not only profound influence or even change the financial pattern of the world economy, but also a vivid lesson to the global banking industry. After the outbreak of the crisis, the United States Government has put forward the toughest financial reform bill for decades, expanding market intervention, and with economic globalization and financial liberalization, we need to absorb the experience and lessons of American banking system reform in the context of financial crisis. Citigroup is a typical example of the bank that influenced by the financial crisis and restructured.

This paper will study the after-effects of 2008 – one of the most severe U.S financial crisis happened in the global economy. The recession of 2008-2009 was the longest and had its deeper effects. The sub-prime crisis of September 2008 affected not only US but it’s footprints across the globe. The financial economy across the globe suffered very badly, thereby leading the weakening of the economy. According to several economists, the crisis of 2008 was the most severe economic contraction, though less than the Great Depression. To maintain

Starting from an extremely low base, Laos’ GDP growth rate has an average of 7 % since 1990s (Sondergaard) until the Asian currency crisis hit its economy in 1997 (“Laos Profile - Overview”). Laos then experienced a second economic crisis of its history. The national currency lost “more than nine-tenth of its value” (“Laos Profile - Overview”) and

Naturally, during an inflationary period it becomes very difficult for the government to fulfill its macroeconomic targets. Almost all targets, such as GDP growth, price inflation, bank borrowing, trade deficit, budget deficit, become difficult to achieve. This questions the credibility of the government. Costs of development project and non-development expenditure increase, due to which the government needs more funds the following year by the amount of inflation to keep economic activity at the level of the former year.

Having said that, there was an even bigger surprise. Economists and regulators, who are supposed to understand and use history, also did not learn from these experiences. Perhaps they were blinded by the political climate of the time. It is always hard to disagree with the “established science” of the time. After all, there was a time when everybody “knew” the world was flat. Only the “insane” thought otherwise.

The 2008 financial crisis was one of the worst economic times since the 1929 Great Depression. It led a worldwide economical, social, and political instability that shook the very foundation of the term “laissez-faire”, or free market. Millions of people around the world lost their homes and their jobs, while large corporations and entire countries were at the brink of insolvency. Others, who are as unfortunate, lost their life savings and pension funds. But it is important to question what led to the events toward the collapse of the world wide financial system.

The financial crisis of 2007/2008 had a negative impact on the UK economy, resulting in low growth and high level of unemployment while inflation constantly remained above the 2% target. In those extraordinary circumstances focus of monetary policy had to be on growth rather than reaching inflation target, resulting in gradual reduction of the Bank rate from 5.75% in middle of 2007 to its lowest level of 0.5% in the beginning of 2009 (BoE, 2014). Although, a low interest rate led to significant depreciation of sterling, a tightening policy at that time would be a major mistake, that could lead to deflation and depression, rather than recovery and inflation around target (Fisher, 2014). Despite any effort pursued by monetary policy there was not only sign of the economic recovery. Moreover, the conditions deteriorated, with negative GDP figure, high level of unemployment and inflation rate remained above the target the economy was in recession. The conventional measures used by the MPC to stimulate economic growth proved to be inefficient, and the risk to fall into triple-dip recession remained. In order to provide additional stimulus into economy, the Bank had to make a decision on implementing unconventional measures. In January 2009, the Bank set up an Asset Purchase Facility to buy high-quality assets with the aim to improve liquidity and credit condition. The MPC purchased £200 billion of financial assets during period between March and November 2009. Although GDP figure

The 2008 financial crisis leaded the USA to one of the most important recession after the Great Recession of 1980. It started in 2006 with the subprime crisis, and the proliferation of mortgage backed securities following by the estate crisis. The crisis was global ; it affected the whole economy; the financial institutions as well as the households and investors, and caused a stock market crash in September 2008. The government proposed several plans and packages to overcome the situation.

The Global Financial Crisis, also known as The Great Recession, broke out in the United States of America in the middle of 2007 and continued on until 2008. There were many factors that contributed to the cause of The Global Financial Crisis and many effects that emerged, because the impact it had on the financial system. The Global Financial Crisis started because of house market crash in 2007. There were many factors that contributed to the housing market crash in 2007. These factors included: subprime mortgages, the housing bubble, and government policies and regulations. The factors were a result of poor financial investments and high risk gambling, which slumped down interest rates and price of many assets. Government policies and regulations were made in order to attempt to solve the crises that emerged; instead these government policies backfired and escalated the problem even further.

The 2008 financial crisis, also known as the U.S. Subprime Mortgage crisis, is considered by many economists to be the most perilous crisis faced by the modern day world economy since the 1930s Great Depression (Krugman, 2009). The collapse of Lehmann brothers, one of the world’s leading investment banks before declaring bankruptcy, in September 2008 almost took down the world’s financial system. Many factors such as U.S. Home ownership policies, consequential securitisation, irresponsible lending by banks, deregulations of banks were pointed out as major contributing factors that precipitated the financial crisis. The 2008 financial crisis eventually resulted in an inevitable global economic meltdown despite aggressive bailout efforts by

Frederic Mishkin makes the point in the text, The Economics of Money Banking, and Financial Markets (2010) that “Banks and other financial institutions are what make financial markets work. Without them, financial markets would not be able to move funds from people who save to people who have productive investment opportunities.” (p.7). The movement of funds between savers and those with productive investment opportunities is the means of creating growth. When people lose confidence in the economy this activity freezes or weakens, consequently, asset prices decline, unemployment rises and companies default as was the case of Lehman Brothers in 2008. The freezing of the flow of money is a financial crisis. Today, the global flow of

Over the years, Vietnam’s balance of payments displayed large current account deficits in years between 2008 to 2010 but reached a surplus from 2011 and onwards (Vietnam Report, 2013). Vietnam’s balance of payments gained surplus in years 2011 and 2012, first half of 2012 there was a surplus of US$6.451 billion. The surplus have greatly helped Vietnam through improving its financial power, reducing inflation levels, stabilizing exchange rates and also help recover the country’s foreign reserve (Phuong, 2012). From onwards, Vietnam continues to show frequent trade surpluses as export growth have

Vietnam has gone through a successful development process, known to be one of south east Asia’s fastest growing economy and could possibly become a developed nation by 2020 (BBC News, 2014). Vietnam was once one of the poorest countries in the world in 1986 with per capita income below $100. As of present, Vietnam has transformed into a lower middle income country with per capita income of $1,960 by 2013 (The World Bank, 2014). Vietnam’s GDP per capita have been rising every year as shown in Fig. 1.

Economic of Viet Nam develops rapidly from 2009 to 2010. According to General Statistic Office, GDP in 2009 is $1000/people and it will be increase 6.5% [16].