The Financial Crises Of 2008

The financial crisis that happened during 2007-09 was considered the worst financial crisis in the world since the great depression in the 1930s. It leads to a series of banking failures and also prolonged recession, which have affected millions of Americans and paralyzed the whole financial system. Although it was happened a long time ago, the side effects are still having implications for the economy now. This has become an enormously common topic among economists, hence it plays an extremely important role in the economy. There are many questions that were asked about the financial crisis, one of the most common question that dragged attention was ’’How did the government (Federal Reserve) contributed to the financial crisis?’’

Although it can be said that capitalism has prospered throughout the centuries and has turned into a strong economic practice, it hasn’t been exempt of criticism. Marxist school of thought sets forth the most

The outbreak of 2007-2009 financial crisis and its devastating impact on the economy left no room for further implementation of conventional monetary policy. Once the zero lower bound had been reached, as well as the connection between official interest rates and market rates was lost, it was obvious to policymakers that they were in front of an exceptional situation, and in an analogy to what Hippocrates claimed about remedies, this situation called for exceptional measures that could support the functioning of financial markets.

It has been known that in 2008 a global financial crisis appeared with the collapse of various large financial firms in the United States and spread leading to a global economic turmoil, also known as the 2008 Global Recession. It was this crisis that had all begun from mortgage dealers giving mortgages to people not qualified for home loans, or also known But it did not stop there. Mortgage lenders would then sell these loans to a bank or to government-charted institutions that were created to buy up mortgages and provide mortgage lenders with more money they could borrow from. From there, the institutions would sell the mortgages to investment banks that would keep them with thousands more into a “mortgage-backed security” that would provide

After the financial collapse of 2008, the mortgage environment changed dramatically for both buyers and brokers. In order to protect consumers and raise confidence in the market, the Federal Reserve Board introduced regulations that limited what banks and mortgage originators could do such as curtailing certain business practices and imposing stricter requirements on capital. However, these actions have unintentionally affected broker competition, causing big banks to exit the housing market, which has led to the proliferation of shadow banks and higher-risk practices. These unforeseen consequences could potentially put the housing market at risk by creating a negative environment for consumers instead.

During the turn of the twentieth century, the world was swept with conflicting ideologies, with many striving to establish what they believed as the impeccable method of economic administration. In 1917, an ideology in the Kingdom of Russia, henceforth known as Socialism, grappled the nation’s populace as a popular method of garnering them out of poverty (Ball). Across the Western world, however, Capitalism and its free-market-based thinking took root in many forms, opposing the very ideals of its opposite; it would be destined to clash with its Eastern counterpart. Capitalism and Socialism differ in terms of operation, but both strive to bolster the value of man.

The Financial Crisis of 2008 was the worst financial crisis since the Great Depression, however a lot of American’s want tougher law of be enforced against executives and companies they think started the mess (Jost/Misconduct). Civil charges have been brought up against major banks for misleading investors, but a federal judge rejected a proposed settlement saying it was too lenient (Jost/Misconduct). The flood of subprime mortgages roiling the housing market in the U.S. is also causing the worldwide credit crisis (Jost/Crisis). Investment banks everywhere are taking billion-dollar losses, forcing them to revalue their belongings (Jost/crisis). This crisis started under the surface for many years then emerged into the public in March 2008

Since it began in 2008, the US has faced what is being called the “great recession.” It is 2013, and it is clear apparent that it is a “recession” longing to be cured. Through the works of Putnam, Sum et. al., Wisman, and Colander, we can better understand this crisis and look for the best way to get out of it.

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

The financial crisis that began in 2007 right through to the summer of 2008 was perceived as global crisis that affected various countries including the United Kingdom. It was predominately caused by failure to regulate financial institutions and systems appropriately. (Davies, 2008) The world was shocked and surprised particularly politicians and policymakers. Initially their response was to conduct a crisis management as a solution but later discovered that the crisis was one of the worst in history. As a result reforms on financial regulations had to take place not only nationally but within Europe and on an international level. Gordon (2010) argues that financial crises are nothing new, however they have become more complex over the years and therefore politicians and policy makers face major challenges in implementing the right form of regulation to comply with the complexity of the financial sector. In the UK, at one point in history command and control (CAC) was perceived as the suitable approach to regulate the financial industry; however self-regulation was later introduced as the effective form of regulation based on the neoliberalism concept. After the financial crisis self-regulation was being criticised therefore leaving policy makers, politicians and economists to decide what form of regulation would be appropriate to effectively regulate financial institutions that would avoid and prevent further financial failures. Therefore the purpose of this essay is

Australia’s economy is one of the largest economies in the world, with a nominal GDP of over 2 trillion dollars. The Australian government has to deal with multiple issues in the macroeconomic world to achieve three goals. The factors affecting these goals have to be identified and either harnessed or blocked by the government. The Global Financial Crisis of 2007/08 also caused the Australian government to deal with its failure to reach its macroeconomic goals.

Ever since the economic virus called “negative interest rates” scattered over European and later Japanese banks, our economic system has been the most unstable since the financial crisis of 2008. The virus, negative interest rates, is a concept in which the central bank charges interest in borrowing money and holding an account. It was brought forth in efforts to increase economic growth by giving commercial banks a tax on the large amount of reserves they hold in the bank. In other words, commercial banks’ negative charge results in the commercial banks having to pay to keep their money at the central bank.

How an attempt to avoid a bubble, led to a crash that brought a country near to complete collapse.

The financial collapse of 2007/2008 was due to the significance of sub-prime mortgages and mortgage-backed securities. A sub-prime mortgage is a mortgage given to individuals who are refused prime mortgages. Whilst mortgage-backed securities is when banks securitise mortgages by pooling them together and then selling them to investors. Investors then receive monthly interest and principal payments, whilst banks receive a fee for the sale. In 2007/2008 those who had sub-prime mortgages were failing to keep up with principal payments, which was exacerbated by rising interest rates. Meanwhile, subprime mortgage-backed securities decreased in value forcing banks to sell them at low prices and incur a financial loss on those remaining. Consequently, these factors made institutions suffer with reduced demands for mortgages, declines in stock prices, falling liquidity in the market and having to write off millions of bad debt. As a result, this started the financial crisis of 2007/2008.

Different nation and states utilize unique economic philosophies to manage how limited resources are allocated within their societies. The two most common of these are capitalism and socialism. Even among these two prevailing schools of economic thought, which systems is emphasized can vary from country to country. The United States has always favored strong forms of capitalism since its inception, while China, the Eastern Bloc nations, and the former USSR have experimented with extreme forms of socialism in their recent history. Western Europe, while favoring capitalism, has implemented many socialistic policies to achieve a middle ground between the two. Within said nations, citizens often directly align their preference of economic thought to a blind patriotism to his or her native land’s policies, without a cogent understanding of how such policies work or don’t work. Such dogmatism can be mitigated by under taking a careful examination of both systems’ pros and cons.