StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...

Financial Crisis Assignment - Case Study Example

Cite this document
Summary
The whole world was slowly sinking into a financial crisis by the end of 2007 that showed its true destructive colors in early 2008 and 2009. The financial crisis of the late 2000’s has been labeled as the worst global recession since the Great Depression of 1930’s…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER93.7% of users find it useful
Financial Crisis Assignment
Read Text Preview

Extract of sample "Financial Crisis Assignment"

Download file to see previous pages

Its effects were far reached and almost everyone on the globe was impacted by it on some level. Those who were closer to financial markets and deeply involved in the investment business faced greater impacts and are still incurring huge losses. This crisis raised questions that pointed fingers on the functioning of the global financial markets. The liquidity crisis was triggered by a bunch of policies that were implemented by the United States banking system to promote massive investment and growth in the economy.

Nevertheless, what started as an attempt to increase consumer spending and encourage investor confidence soon turned out to be the underlying weakness in the financial system. The imbalance in the global economy became too massive for any individual government to control and with the passage of time it only worsened. A critical part was played by the developed economies whose excessively loose monetary policies during the early part of this decade contributed in widening the gap between the West and the East.

It is very interesting to know that the budget deficit of the United States was at an all time high during 2006-2007, while on the other hand huge surpluses were being recorded in Asia, particularly China and other oil exporting countries of Middle East. If we look at figures they reveal a clearer picture, the current account balance as a percent of GDP for US was -4.7%, while for China, Saudi Arabia, Russia and UAE was 10%, 28.9%, 6.1% and 15.8% respectively. Analyzing the figures it clarifies that even after the West was generating billions of dollars in revenue, the global net flow was concentrated towards the Eastern giants as they were becoming powerful by the day.

This can be strongly attributed to the fact that the gap between the saving-investment function was extensive and this gap was only widening with time since developing countries started relying more heavily on developed economies to provide for their development expenditures. There were some direct impacts of these huge cross-border financial flows on the financial intermediation process. (Mohan) One of the major causes of the crisis is attributed to the sub-prime lending in the housing industry in America.

In order to increase the share several banks gave loans to individuals who were doubtful of paying back their installments in the future. Nevertheless, since in the short run it would show an artificial boast in the economy along with a positive growth of the company many bankers and financial institutions to fulfill their personal interest gave top notch credit ratings to doubtful individuals. This resulted in a massive spending in the housing sector even though it was clear this was only short-lived.

Banks gave loans on negligible interest rates at times even below 1%, showing the extent of how eager they were to raise their customer base. The financial sector was involved in a personal struggle to widen its customer base. Derivates were used to inject huge sums of money from the investors in the market, but these derivatives were passed on to other investors and so on. The original derivative holder had no idea who was in possession of his derivative as it was a long chain that no one was aware of.

The derivative market surpassed the whole US GDP number and according to estimates in 2010 the US GDP stood at $14 trillion dollars compared to the $300 trillion derivative market. It is apparent that the market was financially diluted and

...Download file to see next pages Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Financial Crisis Assignment Case Study Example | Topics and Well Written Essays - 1250 words”, n.d.)
Financial Crisis Assignment Case Study Example | Topics and Well Written Essays - 1250 words. Retrieved from https://studentshare.org/macro-microeconomics/1440667-eco
(Financial Crisis Assignment Case Study Example | Topics and Well Written Essays - 1250 Words)
Financial Crisis Assignment Case Study Example | Topics and Well Written Essays - 1250 Words. https://studentshare.org/macro-microeconomics/1440667-eco.
“Financial Crisis Assignment Case Study Example | Topics and Well Written Essays - 1250 Words”, n.d. https://studentshare.org/macro-microeconomics/1440667-eco.
  • Cited: 0 times

CHECK THESE SAMPLES OF Financial Crisis Assignment

The Subprime Mortgage Crisis

hellip; The subprime crisis is believed to have had a significant role in the occurrence of the Global Financial Crisis in 2008.... The paper "The Subprime Mortgage crisis" focuses on the ethical issues concerned with subprime loans.... The author of the paper provides the analysis of the subprime crisis and financial regulation, its international and comparative perspectives in particular.... This type of crisis situation is a consequence of the subprime lending and not caused due to over-lending by banks....
7 Pages (1750 words) Assignment

Ontracts and Procurement

Therefore, the financial risks are insignificant.... Name: Instructor: Course: Date: Project management assignment ASSIGNMENT 254 Assignment 1 Statement of Work Date: Client: Project: Begin date: End date: Summary The objective of this project is to transfer and relocate the company's headquarters from current site (A) to Site B....
8 Pages (2000 words) Assignment

Corporate Social Responsibility in Times of Financial Crisis

In the paper “Corporate Social Responsibility in Times of Financial Crisis” the author focuses on corporate governance regulations, which promote corporate responsibility.... ssessment Question: Discuss the importance of ethics in business in light of the recent global Financial Crisis (GFC)Note: All supporting evidence needs to be cited in-text using the Harvard style.... xplanationDeveloped countries broadened the applicability of their banking and financial methods in the last few years and the recent global recession have shown that these methods incorporated significant flaws....
12 Pages (3000 words) Assignment

Public Opinion

Define crisis?... crisis can be defined as a threat to operations that can have a negative impact if not appropriately handled (Coombs 6).... It refers to the probable damage that a crisis can cause a given organization or industry and its stakeholders.... There are many ways to respond to a crisis of conflict.... Coombs offers several strategies for organizational use when dealing with a crisis.... ccording to Coombs, there are several strategies that organizations' managements use in dealing with the crisis....
1 Pages (250 words) Assignment

Class Dialogue Assignment

Africa is the center of human brutality with the most recent example of this crisis being the ongoing Southern Sudan tribal crisis that has left many dead and others homeless.... I strongly believe that these series of crisis confirms Paul VI's (1993) quote that “Today everything comes under the laws of competition and the survival of the fittest, where the powerful feed upon the powerless”.... Chapters II (50-60) elaborates on the challenges that humanity is facing in the modern world that range from idolatry of money, having financial systems that rules rather than serving, inequality that leads to violence to cultural challenges....
1 Pages (250 words) Assignment

The Great Recession: An Affair to Remember

Manufacturing of these materials triggered economic activities in the once sleepy towns of the U.... .... Technology shift was needed for mass production of war related… The United States had the opportunity of economic growth at the beginning of the war because it had idling manufacturing plants and resources caused by the Great Depression....
5 Pages (1250 words) Assignment

How Gokhale Describes Globalization

Hence, this has had a positive impact on the inner cities and rural areas of the country by providing financial stability in the country.... financial stability allows for growth in local start-up businesses and companies that are revenue sources for the rural areas and inner cities....
1 Pages (250 words) Assignment

The Export-Import Working Capital Program

Financial Crisis, Temporary Liquidity Guarantee Program, and the Impacts on the Fixed Income Markets.... Export-Import Bank only fills the gap left in the financial market by the existing banks (Krahmer, 1990).... That increases its effectiveness because businesses use it when under financial need.... For instance, the application fee is approximately $100 submitted with company's financial statements for at least the past one year....
1 Pages (250 words) Assignment
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us