What Is Iceland A Good Thing About Int The Macroeconomic?

The financial crisis from2007 to 2008 is considered the worst financial crisis since the Great Depression of the 1920s and destroyed the U.S. economy severely. It led the housing prices fell 31.8%, the unemployment rate rose a peak of 10% in the United States. Especially the subprime market, began defaulting on their mortgage. Housing industry had collapsed. This crisis was not an accident, it caused by varies of factors. The unregulated securitization system, the US government deregulation, poor monetary policies, the irresponsibility of 3 rating agencies, the massed shadow banking system and so on. From my view, the unregulated private label mortgages securitization is the main contribute factor which led the global financial crisis in 2008.

Over the past two decades, nearly half of the homeowners obtained their loans through subprime mortgage lending. Subprime mortgages were becoming increasingly ordinary in daily life of business for homeowners over the past two decades. However, numerous lending institutions provided home loans to borrowers who have high credit risks and are not be able to payback the loans. New Century, which is the second largest subprime lender in the country, prospered over the last decade. However, its sudden collapse following the restatement of company’s financial statements, contributed significantly to the subsequent events that eventually lead to the plunge of global financial systems in

A substantial part of the expansion of the banks ' loan portfolios were loans collateralized by Icelandic corporate stock. As a result, the value of Icelandic stock was an important determinant of the value of the banks ' loans and, therefore, assets. The value of shares rose and then peaked in mid-July 2007. By July 2008, share prices had fallen to less than half their value at the peak. This loss in collateral value naturally called into question the probability of lenders being able to repay their loans.

The U.S. economy is currently experiencing its worst crisis since the Great Depression. The crisis started in the home mortgage market, especially the market for so-called “subprime” mortgages, and is now spreading beyond subprime to prime mortgages, commercial real estate, corporate junk bonds, and other forms of debt. Total losses of U.S. banks could reach as high as one-third of the total bank capital. The crisis has led to a sharp reduction in bank lending, which in turn is causing a severe recession in the U.S. economy.

However, Bernanke admonished investors by the book that even though banking regulation and supervision protect investors as always, if some particular events or financial crisis happened, like housing bubble and mortgage markets crisis, either or both of these two system work. The example in the book is booming house prices in 2000s. After the sharply increasing of housing prices, risky mortgage lending likes subprime lending trouble began surfacing in 2006 and 2007. The risky mortgage comes with more demand for housing, which will again push the housing prices higher and higher, reinforcing a vicious cycle. As a result, because of the nominate housing price is much higher than the real price, the careful lenders who have good credit step out the market, the rest of borrowers are subprime lenders, “some borrowers were defaulting on loan after making only a few, or even no, payments.” (318) In the book, Bernanke conceded that Fed responded the trouble slowly and cautiously. When Board in Washington determined to make supervision of bank more centralized, he still overconfidently believe that Reserve Bank staff were better informed about condition in their districts. Another Bernanke’s conceit is that the financial regulatory system was not as stable and comprehensive as he thought before the financial crisis. In

Macroeconomics focuses on motion and flow direction in the economy as a whole, while the microeconomic focus is placed on the factors that affect the decisions made by companies and individuals (Macroeconomics, 2014). Factors investigated by macro and micro will often affects each other, such as the current level of unemployment in the economy as a whole that could impact the supply of workers of an oil company can rent out, for example.

In 2008, one of the biggest financial recessions of our time occurred. The blame that should be placed on the unexpected crash of the housing market should come from the shady business strategies used by banks and investment agencies, which caused millions of everyday people to lose their jobs and homes. The role of subprime mortgages, CDO’s, and illicit ratings caused the biggest financial crisis since the Great Depression. The culmination of these things led to the downfall of the economy and start of a recession.

The Financial Crisis of 2008 was probably the worst financial disaster since the great depression of the 1930’s. Some causes included deregulation and derivatives, subprime mortgages, and just pure greed displayed by banks. Some effects included substantial bank losses or bankruptcy, loss in real estate wealth, and cost a fortune to the United states government.

Since the crisis of 1933 the United States has never been the same, following with the crisis of 1980 and 1990 and relapsing with the crisis of 2008. With banking crisis’ the United States economic history isn’t the best. Our country's banking and economic status depends on what we do and don’t. Bank crisis’ are very rare. Being rare, bank crisis’ are very detrimental. Banking crisis’ have greatly impacted the economy, destroyed families, left people homeless, and even destroyed future generations. However, the U.S. has definitely learned a thing or two as well as increased its preparation and security due to these banking crisis, that can surely allow a efficient recovery and better preparedness if a crisis were to occur again.

The budgetary emergency happened in light of the fact that banks could make excessively cash, too rapidly, and utilized it to push up house costs and conjecture on money related markets. With a large portion of 10 years' insight into the past, it is clear the emergency had numerous causes. The most clear is simply the agents—particularly the unreasonably overflowing Anglo-Saxon sort, who asserted to have figured out how to oust hazard when in truth they had basically forgotten about it (“Crash Course”, 2013). National brokers and different controllers likewise bear fault, for it was they who endured this imprudence. The macroeconomic scenery was imperative, as well. The "Incomparable Moderation"— years of low swelling and stable development—cultivated lack of concern and hazard taking. An "investment funds excess" in Asia pushed down worldwide financing costs (“Crash Course”, 2013). Some examination likewise entraps European banks, which obtained avariciously in American currency advertises before the emergency and utilized the assets to purchase dodgy securities. Every one of these variables met up to cultivate a surge of obligation in what appeared to have turned into a less unsafe world.

In 2008, the world experienced a tremendous financial crisis which rooted from the U.S housing market; moreover, it is considered by many economists as one of the worst recession since the Great Depression in 1930s. After posing a huge effect on the U.S economy, the financial crisis expanded to Europe and the rest of the world. It brought governments down, ruined economies, crumble financial corporations and impoverish individual lives. For example, the financial crisis has resulted in the collapse of massive financial institutions such as Fannie Mae, Freddie Mac, Lehman Brother and AIG. These collapses not only influence own countries but also international area. Hence, the intervention of governments by changing and

The financial crisis of 2007–08, also known as the “global financial crisis” and the 2008 financial crisis, is considered by many economists to have been the worst financial crisis since the Great Depression of the 1930s. It threatened the collapse of large financial institutions, which was prevented by the bailout of banks by national governments, but stock markets still dropped worldwide. In many areas, the housing market also suffered, resulting in evictions, foreclosures and prolonged unemployment.

The generally recognized most important cause is, however, excessive and imprudent lending by banks.1 One cannot blame banks for this because, like everyone else, they also wish to maximize their profits in a materialist cultural environment where maximization of income and wealth is the highest measure of human achievement. The more credit they extend, the higher will be their profit. It is high leverage which enables excessive lending. Excessive lending, however, leads to an unsustainable boom in asset prices followed by an artificial rise in consumption and speculative investment. The higher the leverage the more difficult it is to unwind it in a downturn. Unwinding gives rise to a vicious cycle of selling that feeds on itself and leads to a steep decline in asset prices followed by a serious financial crisis, particularly if it is also accompanied by overindulgence in short sales. It is the combined influence of three forces which can help prevent the recurrence of crises. One of these is moral constraints on the greed to maximize profit, wealth and consumption by any means in keeping with the mores of the prevailing secular and materialist culture. The second is market discipline which is expected to exercise a restraint on leverage, excessive lending and derivatives. The third is reform of the system’s structure along with prudential regulation and supervision appropriately designed to prevent crises, achieve

Then the crisis has spread to Asia especially in Japan, Korea, China, Singapore, Hong Kong, Malaysia, Thailand, and Indonesia. Some experts believe that the problem was triggered by mark-up housing price in the United States. Also, the U.S. Federal Reserve (the Fed) had less prudent to stabilize the financial system since many years. This situation is motivated by a hope to keep up the demand for residential properties and then banks in the United States distributed the housing loans to people who do not have adequate financial capacity such as, the people who do not have income, job and asset. Furthermore, these housing credit made into investments tool to attract the investors such as banks, securities firms and insurance. Unfortunately, there are a lot of unpaid loans in a large numbers. As a result, banks have difficulties to pay investors who need to withdraw money from banking products while prices are still high. It makes the market structure to be disturbed because the interrelated of investment product.

The 2007-2008 US ‘credit crunch’, also known as ‘subprime mortgage crisis’, is one of the largest financial distortions that has recently struck US economy and resulted in the huge slump in the economic activity. Actually, there most likely exists no single reason that has led to the financial crisis of such degree but rather a simultaneous combination of several practices in the US economy of that time. Experts usually distinguish the following diverse causes of 2007-2008 US ‘credit crunch’: the increase in the spread of the structured finance products which lacked transparency, deregulation of financial sector and lack of financial institutions’ supervision, inappropriate credit ratings assigned by credit rating agencies on complex financial products, excessive lending activities that has led to the increase in credit risk, lack of adequate liquid reserves to back the existing commitments and some others. Generally, all these causes can be divided into two main groups: one attributed to the fails of government regulations and supervision and the other attributed to the increased popularity of financial innovations. This essay will discuss all major reason that contributed to the start of the crunch and prove that credit risk attributed to lending activities is not the root cause but rather one of consequences of the spread of financial innovations and thoughtless government policy. The structure of the essay is the following. The essay starts with giving a brief overview