The Financial Crisis Of 2008

The Great Recession in 2008 led to a huge crisis in the United States economy. This recession almost led to the entire collapse of the United States economy due to the constant unstable changes in legislation, regulation, along with the changes in fiscal and monetary policies. Furthermore, many economists believe that the increase of excess monetary and government irresponsibility led to the overall crisis in the mid to late 2000’s. Some economists believe that the oversupply of monetary contributed to the 2008 crisis due to low interest rate targets that were substantially below the monetary requirement. In this paper I will discuss the effects of the changes in monetary and fiscal policies that altered the economy in 2008 as well as the current and desired gross domestic product for the future United States economy.

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?’’

The financial crisis that put our economy on a downhill rocky road is known as the Great Recession of 2008. The U.S. Governments resolution to one the biggest panics was revolved around multiple bailout and fiscal measures. The fight to pull our weakening economy out of a dark hole left the American people with hope of advancing what gets thrown their way. The many bailout programs implemented by the U.S. Government can only hold the economy together for so long until were up to our knees in debt.

The Great Recession of 2008-9 was the deepest and longest capitalist economic slump since the Great Depression of 1929-32. The recent financial crisis is known as the “Great Recession” of 2008-9. Its downturn was sparked by the collapse of the US housing market. In 2006, the prices of home began to rise and the banks began to encourage potential homebuyers to take out larger loans. There were lower interest rates at the time, and this seemed like a good idea for most individuals who were searching for a new home. Then, in mid-2007, the interest rates began to rise. The values of the homes decreased and the amount of money a house was worth declined significantly. Many homeowners were stuck with large loans, increasingly high interest rates, and a decreased price of their home. Many homeowners went into foreclosure or were evicted. This eventually led to large financial institutions and banks to become bankrupt, which lead to an overall fall in the US economy. Stocks dropped, consumer spending declined significantly, and companies began to go out of business (Athanasiu, 43).

A recession is full-proof sign of declined activity within the economic environment. Many economists generally define the attributes of a recession are two consecutive quarters with declining GDP. Many factors contribute to an economy's fall into a recession, but the major cause argued is inflation. As individuals or even businesses try to cut costs and spending this causes GDP to decline, unemployment rate can rise due to less spending which can be one of the combined factors when an economy falls into a recession. Inflation is the general rise in prices of goods and services over a period of time. Inflation can happen for reasons such as higher energy and production costs and that includes governmental debt.

Fiscal policy is the use of government revenue (taxes) and expenditure (spending) to influence the economy. (Weil, 2008) Fiscal policy is “used to stabilize the economy over the course of the business cycle.” (Fiscal policy, n.d.) Examples of both of these according to National fiscal policy response to the Great

The stock market is what one would know as a collective group of buyers/sellers that trade stocks, also known as shares on a stock exchange. These securities are listed on the exchange itself and trade freely each and every day. On the exchange, stocks move hands day in and day out. Companies are able to get their stock listed on the exchange at any time that they want. There are other stocks, too...known as OTC stocks or over the counter stocks that go through a specific dealer. Larger companies tend to have their stocks listed on exchanges all throughout the world. Participants in the market can be anyone from your grandma, to retail investors, day traders, institutional investors, and so forth. One notable exchange is the NYSE; also known as The New York Stock Exchange. Moving forward, a stock market crash is when a decline of stock prices takes place throughout the stock market that results in a catastrophic loss of wealth via paper. The crashes are driven strictly by panic 9 times out of 10 a crash takes place. As a crash is happening, panic occurs; the panic keeps evolving and ends up like the snowball effect before you know it. A crash occurs when economic events take place. These events are always bad news... The behavior of traders follows, which leads to a crash when panic ensues. Crashes normally occur of a seven day period and may extend even further. Crashes happen in bear markets as the market is already weak to begin with. Once traders see a drop in prices,

I have always personally thought that the cause of most financial crises is created by the governments and high executive. Most people do not know that white collar crimes occur every single day, but they are not exposed to the news because this type of crimes is not as important as any other crime such as a murder, robbery, and so on. However, the public gets rob on daily basics and the government allows it. This is the reason why only a few people got convicted during the 1990’s and 2008 crises. My best example of government victimization is by taking a look at the economy of countries like Venezuela, Cuba, and many others. In these countries, the economy is extremely bad for regular people; contrary to the people that hold a position

The Consumer Financial Protection Bureau, the agency created after the financial meltdown of 2008, has taken aim at the cash advance loan industry almost since the agency opened its doors. The CFPB 's latest attack is in the form of proposed rules that many people believe would "regulate cash advance loans out of existence." The proposed rules would apply to every lender whether they make online cash advances or operate a brick-and-mortar store. Throughout his campaign, Donald Trump repeatedly expressed his antipathy for the CFPB and the law that created the agency, the Dodd-Frank Act. Now that Trump has won the presidential election, many people are wondering whether the cash advance loan industry might benefit under his administration.

As of late 2008, "approximately 6% of all mortgage loans in United States [were] in default". (Davis, 2008) Many of the mortgage loan defaults were categorized as sub-prime loans which were made for borrowers with no down payments on the home being financed, poor credit ratings, and no substantiation of income or assets. This leads to close to 25% of these types of loans being in default. This trend seemingly started in the late 90s when many of the large establishments were easing their credit requirements among low income consumers and minorities. Curiosity peaks with this information. Why would companies start issuing out loans that were classified as being risky, in such

Now let’s look at what happened at the 2008 global financial crisis. I am not getting into the details but just giving a simple overall picture of what went wrong. The years just before the crisis saw a flood of irresponsible mortgage lending in America. Loans were given out to subprime borrowers without proper evaluation on their credit history and repayment ability. These risky mortgages were then converted into low risk securities by government appointed (or funded) agencies to attract investors. Low rate for short-term funds led investors to borrow more money and invested in these securities. Now, these mortgages were collateralised against houses and land property. When the property value plummeted, the collateral value diminished making it difficult to liquidate (McKibbin, W. and Stoeckel, 2009). This is just one of the reasons leading to the crisis. The government lending money to people who have relatively low credit rating and not evaluating with strict standards, as one would do if they were private lenders led to a large pool of bad mortgages. The problem here is loans were sanctioned to people with poorer risks (low interest were made to promote borrowing) and resulted in higher failure percentage

We are now in a state of experimentation, ‘in which the conjuncture of the strange and the familiar, of the stasis and metaporphosis, plays tricks on our perceptions, our positions, our praxis.’ (Comparoff Pg.3). The Financial crises of 2008 has had a major impact on the lives of individuals, for some it has been beneficial for others dire. Many people no longer have faith in the ‘capitalism that presents itself as a gospel of salvation’ (comaroff review, find) and are embracing alternatives to lassaire faire capitalism. The crises has seen the rise of anti-capitalist movements such as ( people before profit) offering an alternative vision to mainstream capitalism. In the EU the crises has forced people to look at alternative solutions,

In the words of Goodhart (2008), “the banking crisis of 2007 was seen in advance” (Goodhart, 2008). This is a result of many different factors. To begin with, between 2001 and 2005, there were very low interest rates, particularly in China due to the Asian crisis of the late 1990s. Because of this financial crisis, many people across Asia were saving instead of investing their money. In order to encourage people to invest in the economy, the interest rates had to plummet to make spending more affordable. Economies exist by trading with one another and if one economy isn 't doing so well, this effects economies worldwide and the USA began to worry about price deflation. During this period, developed countries

The financial crisis of 2008-2009 was an extremely significant event in recent history and has been described as “perhaps the most important economic event since the Great Depression” (Gorton & Metrick, 2012, p.g. 150). We are still experiencing the effects of the crisis today and there is a considerable amount of literature on the subject. There has been much research into the crisis and what caused it (Gorton and Metrick, 2012). Using some of this research both the causes and effects of the financial crisis can be explored. This essay will discuss what happened in the months leading up to the crisis, the causes and effects of the financial crisis and tackles some of the questions that researchers have asked regarding the events of 2008-2009.

The global financial crisis has raised many concerns for the need to restructure the approach of risk and regulation in the financial sector (KPMG 2011). Figure. 4 has shown the structures of Basel III. It aims to increase the capital and liquidity of banks and therefore maintaining the stability in banking sector with full effect in 2019 (Banks For International Settlements 2011).