1. The International Financial Crisis in 1929 Essay
The International Financial Crisis in 1929
Throughout the 1920's in Britain there were economic problems. Unemployment was increasing; therefore there was low domestic demand and large
amounts of poverty. Markets were also being lost abroad, leading to a decrease in trade. However in 1929â31 these problems reached crisis point,
when in 1929 The Wall Street Crash called for an end of American Loans to Britain, and the reâcall of all Britain's debt. This had impact worldwide, as
prices for goods slumped due to lack of demand and business confidence disappeared. In Britain it became clear that the 'Laissezâfaire' policy was not
going to work, but there was a divide in thoughts over which policy to adopt...show more content...
He was, however convinced by King George V to remain as Prime Minister but as leader of a national coalition government. In order to prove that
Labour was a national, responsible party, Macdonald was prepared to do this, as was Philip Snowden, Chancellor of the Exchequor. Snowden believed
that the budget should remain balanced and Britain should remain on the gold standard. He therefore supported the May Committee's proposal despite
Labour's working class stance. However Arthur Henderson the foreign secretary did not agree. Henderson was heavily influenced by the Trade
Unions, and felt strongly that Labour should represent the working class, therefore he felt that if the budget had to be balanced by cutting
unemployment pay and raising taxes it was better for Labour to leave office and leave such policies to the Conservatives or Liberals. This difference
in opinion within the party led to its break up and the formation of a national government due largely to the proposals if the May Committee.
(c) 'Ramsey MacDonald had no alternative but to form a National Government in 1931.' Do you agree or disagree with this statement? Explain your
answer. (15) After the First World War, Britain was thrust into a depression. Unemployment rocketed and wages fell dramatically. The most
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2. The Global Financial Crisis Essay
1.Introduction
1.1.Background
The Financial crisis was triggered in 2006 when US housing market began to crumble as the housing price reached their highest point after years of
speculative price increase; many house owners defaulted on their loans, particularly subprime mortgagers (Archarya et al., 2009). Starting in midâ2007,
the outburst of US housing bubble in the subprime mortgage leads to the global financial crisis that has been often so called 'Great Recession' (Verick
and Islam, 2010).
Archarya et al. (2009) states that it is widely agreed that the fundamental cause of this global financial crisis was the credit boom and the housing
bubble. While Poole (2010) argued that it is a mistake to only take subprime mortgage issue...show more content...
2.Impact of Recession on Customer Behaviour
The financial crisis and economic recession of 2008 unevenly affected economic aspect of countries, industries and extended into social aspects, which
include how the public responded to the recessionary circumstances surrounding it (Gangl et al., 2012). This chapter focus to understand how the
current economic depression shapes the customers behaviour.
Earlier research by Desvaux et al. (2009) found that the recession had led to lower consumer confidence, lower income due to high unemployment rate,
higher living cost because of inflation, lower wealth due to shrinking in household wealth and restricted consumer credit as bank cut lending to
consumer. The above five factors have shaped consumer behaviour in responding to the recession as follows (Desvaux et al., 2009):
Control spending: this is the most common reaction during recession; people would have their own budgets to reduce their overall spending such as
eating out and travel plans.
Replace only when needed: consumers were willing to delay their new purchases of cars or electronics and extend the lifetime of the current assets.
Shop smarter: people have begun to look out for promotions and special bargains, or use internet to find better or lower price.
In addition to the above behaviours in responding to the
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3. Financial Crisis Essay
In 2016 it was estimated that the US wealth gap had reached a width previously seen in the 1920s. Since the 1970s America's middle class has
been shrinking, whilst the lower and upper classes have been growing, the former at a much faster rate to than the latter. It's negative effects are
best stated up John Taylor in the Hover Digest: "On the Fraser index, the United States ranked 2 in the year 2000 and it ranks 14 today. On the
Heritage index it ranked 5 in 2008 and it ranks 12 today. On the World Bank's Doing Business indicator it ranked 3 in 2008 and it ranks 7 today."
(Hover Digest 9). Much of this shrinkage has been attributed to various periods of economic turmoil in the past several decades; the 1979 energy
crisis, the Savings and...show more content...
PostâGreat Depression deregulation began in 1980 when then President Jimmy Carter signed the Depository Institutions Deregulation and Monetary
Control Act into law. This was the first piece of bankâreform legislation since the Great Depression. Among other things, the bill included provisions
lowering the Federal Reserve's mandatory reserve requirements for banks, preempted state usury laws that limited interest rates lenders could charge
for residential mortgages and allowed depository institutions to access the Federal Reserve Discount Window for credit advances. In other words,
banks could borrow more of the taxpayers money, gamble with said money and states' attempts to protect their citizens by regulating interest rates
Banks charged for mortgages on homes. This charity to large Banks was the first to come in a long line of endowments to corporate America caused by
the mushrooming of free market fundamentalism during the Reagan Administration that has persisted to modern day. It is no coincidence that
immediately following the birth semiâcapitalist largess was full of economic issues; deregulation led to irresponsible practices by During the 90s
deregulation continued to sowing the seeds of future downturn for the US economy as both major parties shifted economically right. The paramount of
deregulation from this
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4. The Greek Financial Crisis Essay examples
The Greek Financial Crisis
Ever since the end of 2009, Greece has been involved in a financial and economic crisis that has been record breaking and shattered world records in
terms of its severity and worldwide effects. The Greek government, since the beginning of the crisis, has attempted to take several governmental
measures to try and "stop the bleeding," including economy policy changes, dramatic government spending and budget cuts and the implementation of
new taxes for citizens. In addition to this, the government has tried to alter the perceptions of Greek government and economy by the rest of the
world in an effort to appear both more liberal and more democratic. Greece has also been working to privatize many previous...show more content...
As far as Greece's role in creating this crisis in the first place, it can be said that Greece is at fault for a variety of reasons. The media has been
focusing on the corrupt political system and infrastructure, the lack of competition in the private sector, the wastefulness and inefficiency of the public
sector and a flawed tax system as causation for this mess. When the public sector was expanded in the 1980's, Andreas Papandreou was given various
agricultural subsidies and grants to do with what he pleased. This enabled the funding of certain postâWorld War II groups to heal political wounds and
fund unions and other special interest groups to aid his political capital and strength. The policies enacted in this decade allowed for the increase in
power and funding of the middle class by creating a vast amount of inefficient public sector government jobs for citizens. This resulted in an increase in
the levels of inefficiency, bureaucracy, corruption and wasteful spending coupled with the increase in wages, pensions and benefits. This proceeded to
drain through government money and resources, and did not breed a culture of highly motivated, efficient and effective government employees. A high
amount of debts accumulated as the nation continued to proceed in this way, using state money to subsidize failing businesses
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5. Financial Crisis Essay
The Federal Reserve acted in reaction to the financial crisis in many ways. First, the Federal reserve decreased the federal funds rate to near zero to
encourage inter bank lending. The Federal reserve then performed perhaps one of its most important functions. It acted as the lender of last resort to
banks, including numerous innovative lending facilities. Through 2010 into 2014, the federal reserve did something it hadn't done before. It enacted a
quantitative easing program, in which they made additional purchases into mortgage backed securities (since there were fewer private buyers) and into
government bonds (long term) in order to lower long term rates. That was because at the time the economy was caught in a liquidity trap. Money...show
more content...
While the monetary base did increase a lot due to the federal reserve's recession fighting monetary policy, it was met with a much lower money
multiplier because excess reserves ad depository institutions increased drastically during the period(Mishkin). The American Recovery and
Reinvestment Act (ARRA) was passed in February of 2009. The Bill itself totaled in about $787 billion dollars. This piece of legislation entailed tax
cuts, stat and local government aid, and an increase in government spending. The pieces of fiscal policy such as ARRA can be given credit to
preventing a more severe financial crisis. Under an ISâLM framework, the increase in government spending and the tax cuts (which lead to an increase
in consumption) helped push the economy out of the recession. The resulting policy helped prevent even worse declines in GDP and higher
unemployment rates had the government not acted otherwise. Blinder and Zandi highlight in "How the Great Recession was Brought to an End" the
unemployment rates with and without policy response. They noted that, in 2010 the unemployment rate with policy response was 9.8%, whereas
without policy response it was forecasted to be 15.2%. One of the major aspect of the ARRA that was distinct from TARP is that it was a stimulus bill
aimed more at the American public rather than Wall Street relief. The ARRA had seven components to it that were all intended to increase output, and
decrease unemployment (Amadeo). The first component
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6. The Global Financial Crisis Essay
Introduction In 2008, the world experienced a tremendous financial crisis which is rooted from the U.S housing market. Moreover, it is considered by
many economists as one of the worst recessions since the Great Depression in 1930s. After bringing a huge effect on the U.S economy, the financial
crisis expanded to Europe and the rest of the world. It ruined economies, crumble financial corporations and impoverished individual lives. For example,
the financial crisis has resulted in the collapse of massive financial institutions such as Fannie Mae, Freddie Mac, Lehman Brothers and AIG. These
collapses not only influenced own countries but also international scale. Hence, the intervention of governments by changing and expanding the
monetary...show more content...
An increase in loan packaging, marketing and incentives encouraged borrowers to undertake difficult mortgages so they believed that they would
be able to refinance quickly at more favourable terms. People borrowed money to buy the house and then expected the price to rise and sold so that
they could pay off the debt which owed to the bank and demanded a new loan to buy another house. However, once the interest rate began to rise
and house's price dropped in 2007, refinancing became more difficult and banks could not collect their mortgages. Besides, low interest rates and
large inflows of foreign funds created easy credit conditions for years before the crisis and that simulated the boom in housing construction
(Steverman and Bogoslaw, 2008). Moreover, easy credit and money inflow greatly contributed to U.S housing bubble and the rise of house's price. In
relation to the increase in house's price, the rise of financial agreements such as mortgageâbacked securities (MBS) and collateralized debt obligations
(CDO) encouraged investors to invest in the U.S housing market (Krugman, 2009). When housing price declined in the U.S, many financial institutions
that borrowed and invested in subprime mortgage reported losses. In addition, the fall of housing price resulted in default and foreclosure and that
began to exhaust consumer's wealth and
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7. Global Financial Crisis Essay
Starting from problems of payment defaults on housing loans (subprime mortgage defaults) in the United States (U.S.), then ballooned damaging crisis
of the banking system not only in the United States but extends into Europe and into Asia. Successive cause a domino effect on the solvency and
liquidity of financial institutions in these countries, among others, led to the bankruptcy of hundreds of banks, securities firms, mutual funds, pension
funds and insurance. The crisis then spread to parts of Asia, especially countries such as Japan, Korea, China, Singapore, Hongkong, Malaysia,
Thailand, including Indonesia, which happens to have long had the letters beharga these companies.
From the various critiques by experts, that the problem is...show more content...
Lehman Brothers announced a gradual loss before finally bankrupt. On June 16, 2008, the company announced losses worth 2.8 billion dollars for
the second half of 2008. Followed by losses of 3.9 billion U.S. dollars in partâtoâthree in 2008 (10 September) and culminate in the announcement of
bankruptcy on September 15, 2008. Similar unrest was also experienced almost simultaneously by Merryl Linch, Citigroup, AIG and other large
financial institutions.
This affected the weakening of the real sector with the bankruptcy of major U.S. companies like General Motors, Ford, and Chrysler that threaten the
continuity of work thousands of employees. Sure enough, the U.S. unemployment rate rose to 6.7% in line with the increase in pessimism among
consumers and investors throughout the period from September to November 2008. That is the level of termination of employment (FLE), the
largest in the last 34 years. Carrying 533 000 employees laid off and reached a total of 1.91 million persons in 2008. (Source: U.S. department of
labor). Along with that, on 30 November 2008, the U.S. government also announced a decline in the value of real GDP for part III in 2008 amounted
to 0.3%.
Likewise, also in Europe, the banking crisis in Europe was marked by problems at a small bank in the UK, namely Northern Rock Bank, in midâ2007.
Northern Rock is a true smallâscale private bank in the UK. However, when there broke down in
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8. Financial Crisis Essay
Marconi (2010) believes that the role played by the institutional investors propagated the financial crises. Institutional investors, which is both,
individual or companies do enjoy the benefits of reduced commission preferential regulations. This is due to their large and professional investments.
Institutional investors like the mutual funds, pension funds, hedge funds like Magnetar Capital, and Life insurance companies like the AIG and
investments trusts contributed to the global financial crises of 2007â2008. This financial crisis also referred to as the great recession was triggered by
liquidity problems in the United States economy. Many large financial institutions collapsed according to Geczy (2010). The government had to bail out
...show more content...
There were breaches in accounting practices and general breach of business ethics. The bank directors and the chairman are accused of having
certified false financial statements and not disclosing key financial practices in the bank. Among the undisclosed practices was the Repo 105. The
Lehman had been using it from 2001, it involved using the Repos to finance assets and treating them as sold Repos while accounting. This according
to the report was abuse of ordinary repurchase agreements, it was done to lower the banks leverage as was asked of investment banks toward the end
of 2007. The bank at times even involved its subsidiaries. Financial leverage should have been attained by borrowing and investing the same at higher
interest rates. The auditors Ernst &Young have been accused of professional negligence for failing to disclose these practices thus misled the investors
on the financial status of the bank. Some critics cite the complex financial systems and financial investment products to have been the trigger of the
2007â2008 financial crises. According to Laurence (2010), other factors include: failure of effective regulations in the investment markets,
inappropriate credit interests, and self interest practices among the institutional investors. According to Hughes (2011), some critics also argue that the
institutional investors were behaving in irrational manner
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9. Financial Crisis Essay
The United States of America experienced one of its biggest financial crisis in history and it all started in 2007 when the real estate market crashed.
Real Estate prices began to collapse and early delinquencies in underwritten subprime mortgages began to spike. The financial crisis continued up to
October 2008. The Federal Reserve and other organs of the United States government responded by flooding the markets with money and other
liquidity, reducing interest rates, providing unprecedented assistance to major financial institutions, increasing government spending and taking other
steps to provide financial assistance to the markets in an attempt to revive it.
In 2007, when real estate prices began to collapse, investors started...show more content...
After the rescue of Fannie and Freddie, it seemed like it was more fuel being added to the worldwide financial panic because other companies and
institutions were still in crises. The Lehman Brothers and AIG collapsed and Bank of America bought Merrill Lynch. (ibid.)
The Federal Reserved rescued AIG by exercising its emergency powers under section 13(3) for the Federal Reserve Act, but Lehman was left with no
one to rescue them. The terms of the rescue were similar to that of Fannie and Freddie, "the government received senior preferred stock and warrants,
resulting in an immediate dilution of 80 per cent of common shareholder value and a sharp drop in the value of junior preferred stock." The downside
to this rescue was that AIG's senior and subordinated debt soared and the counterparties on its credit default swaps, but other financial contracts made
out great. (ibid.)
After the collapse of AIG, the Treasury went back to congress again as they did with Fannie Mae and Freddie Mac, but instead of asking for a blank
check, this time around they asked Congress for immediate authority to invest up to $700 billion US dollars in toxic mortgage and other assets in
order to clean up the balance sheets of the United States financial sector. This request was later known as the 'Troubled Asset Relief Program' (TARP),
while it was pending before Congress, Washington Mutual, the largest
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10. 2007-2008 Financial Crisis Essay
The financial crisis of 2007â2008 was one of the worst economic downturns the United States has faced since the Great Depression of the 1930s. It
affected the banking industry by causing banks to squander money on mortgage defaults, bringing interbank lending to halt, as well as affecting credit
being provided to consumers. Another effect was that it caused certain businesses to essentially run out or come to an end. Many companies had to
take advantage of bailouts, but the economic was still in disarray. The financial crisis also affected the country in the longâterm by bringing about new
regulatory programs such as DoddâFrank Wall Street Reform and Consumer Protection Act (Singh, 2015).
Before the beginning of the financial crisis in 2007, rules and policies passed in the United States had required the banking sector to allow more
consumers to be able buy homes (Nielsen, 2008). Starting in the year 2004, the bursting of the housing bubble took place, when Freddie Mac and
Fannie Mae, two of the largest and most wellâknown mortgage lenders in the United States, obtained a large quantity of mortgage assets, including
some chancy mortgages. They charged substantial fees and accepted lofty margins from these subprime mortgages. The mortgages were used as safety
or security for getting private label mortgageâbased...show more content...
TARP stands for Troubled Assets Relief Program. It is a safety net put in place by the United States Congress and was originally worth approximately
$700 billion. It was signed into law in October of 2008 by thenâPresident, George Bush. TARP basically allows the United States government to
purchase assets and equity from financial institutions to strengthen its financial sector. The DoddâFrank Wall Street Reform and Consumer Protection
Act reduced the amount from $700 billion to $475 billion. Then, on October 11, 2012, the Congressional Budget Office stated that total disbursements
would be $431
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11. Financial Crisis Essay
The United States has the biggest financial crisis ever since WWII. Which lasted from September 1, 1939, through September 2, 1945. It was a
sixâyear and oneâday battle. Whether or not the seventyâeight trend is strictly reminding us that revanchism (the political manifestation of the will to
reverse territorial losses incurred by a country) hasn't changed. I recall my economics professor warning his class at the time that, another crisis will
happen soon. So he asked the class, what do we fear more, inflation or recession? Many answered recession, because if the number of jobs decreases
we will be in trouble and health insurance will be taken away. Most employers are now seeking for more qualities, and it is just getting harder to get
...show more content...
There are at least six different countries in the United States that have universal healthcare coverage for their citizens. Just as Africa, Asia, Europe, the
North America, South America, Oceania and I'm sure several ahead of us. In the first place, Jacob Zuma, Africa's president accomplished their
healthcare systematic by the poor automatically being enabled to health services and treatments while the wealthy pay for the hospitalization according
to a sliding scale. In Africa, there's a chain of hospitals, clinics, and dispensaries that provide treatment to the community, with the Social Security
system financing their health services. Even if many people must still cover and pay for part of their costs due to the amount paid by the Social
Security Africa's healthcare system has been unchanged since 1987.
Secondly, Asia is another country that accommodates for their population with universal healthcare coverage. Many countries in Asia that provide free
public medical insurance include Bangladesh, Bhutan, Bahrain, China, Hong Kong, India, Iran, Israel), Jordan, Kazakhstan, Macau, Malaysia,
Mongolia, Oman, Singapore, Sri Lanka, Syria, Taiwan, Tajikistan, and Turkmenistan. All the countries in Asia working as a team. If one country can't
provide treatment for a patient, such as cancer than they refer them out to India, and India being one of the biggest subcontinents in Asia. The
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12. Following the 2008 Financial Crisis, conventional financial theories have been challenged for their inability to realistically explain risk. Traditional
strategies of asset pricing often rely on a normal bell curve to make market assumptions, but in reality, the markets do not behave this way. Under a
normal distribution, a majority of asset variation falls within 3 standard deviations of its mean which subsequently understates risk and volatility.
Unfortunately, history would suggest financial markets do not always act in this manner and rather, they exhibit fatter tails than traditionally predicted.
By definition, fat tails are a statistical phenomenon exhibiting large leptokurtosis. This represents a greater likelihood of extreme events occurring
similar to the financial crisis. Since the magnitude of fat tails are so difficult to predict, left tail events can have devastating and unexpected effects on
portfolio returns. As a result, sufficiently protecting a portfolio requires tail risk hedging from unexpected market events.
Normal Distribution In order to understand the significance of tail risks, it is imperative to understand the notion of a normal distribution and its
shortcomings. A normal distribution assumes that given enough observations, all values in the sample will be distributed equally above and below the
mean. About 99.7% of all variation falls within three standard deviations of the mean and therefore there is only a .3% chance of an extreme event
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13. American Bankruptcy Case Study
Starting from the problems of failure to pay housing loans (subprime mortgage defaults) in the United States (U.S.), then bubbled damaging crisis
banking system not only in America but expanded to Europe and to Asia. Successive causes a domino effect of the solvency and liquidity of financial
institutions in these countries, which among others led to the bankruptcy of hundreds of banks, securities firms, mutual funds, pension funds and
insurance. The crisis then spread to parts of Asia, especially countries such as Japan, Korea, China, Singapore, Hong Kong, Malaysia, Thailand,
including Indonesia, which happens to have long had precious letters these companies.
Of the various criticisms of the experts, that the problem was triggered...show more content...
Lehman Brothers announced a gradual loss before bankruptcy. On June 16, 2008, the company announced losses worth 2.8 billion U.S. dollars for
the second half of 2008. Followed by a loss of 3.9 billion dollars in the third half of 2008 (September 10) and resulted in bankruptcy announcement on
September 15, 2008. A similar shock is almost the same experienced by Merryl Linch, Citigroup, AIG and various other large financial institutions.
This reflects the weakening of the real sector with the bankruptcy of major U.S. companies like General Motors, Ford, and Chrysler that threaten
thousands of its employees work. Sure enough, the U.S. unemployment rate reaches 6.7% increase in line with the increase in pessimism among
consumers and investors during the period September to November 2008. It is the job separation rate (FLE) in the 34 largest last year. Recorded
533,000 employees laid off and reached a total of 1.91 million in 2008. (source: the U.S. labor department). Along with that, on November 30, 2008,
the U.S. government also announced a reduction in the value of real GDP for the partâIII of 2008 by 0.3%.
Similarly also in Europe, the banking crisis in Europe was marked by problems at a small bank in the UK, the Bank Northen Rock, in midâ2007.
Northern Rock is a true smallâscale private bank in the UK. However, when there Gonjangâganjing crisis in August 2007 and the bank became the
spotlight. Withdrawal of major funding by the client
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14. The 2008 Financial Crisis Essay
Introduction
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
...show more content...
The economy is known as a new emerging economy especially after entering WTO in 2007. The Foreign Direct Investment (FDI) has increase
considerably and the GDP is over 8% in the period of three years (2005â2007). Nonetheless, it is clear that the economic instability occurs after WTO
accession of Vietnam 1 year. Consequently, the economy has suffered surginginflation as well as trade and fiscal deficit. (Figure 1) GDPCPI
20058.48.3
20068.27.5
20078.58.3
20086.223
20095.36.9
Figure 1 : GDP and CPI 2005â2009 (% change per year)
Source: Asian Development Bank and Vietnam
B. Inflation
Inflation doubled in 2007 and reached a peak at 28% in 2008.The fiscal make up 4â5% GDP and the trade deficit accounted for 20% GDP in which
approximately $US17.5 billion dollars. The influence of high fuel combine with food prices and high domestic demand lead to high inflation. The high
price of fuel in Vietnam illustrates global fuel prices and the high domestic demand of country importing fuel. Furthermore, the increase in global food
prices affect detrimental to the high inflation in Vietnam.(Figure 2) Figure 2 : Fiscal Deficit and Trade Deficit (2003â2008)
Source : IMF, General Statistics Office of Vietnam
C.Impact on Trade
The global financial crisis has affected severely on Vietnamese exports. After joining the WTO, Vietnam's trade has become depend on global
16. Effects Of The Financial Crisis Of 2007-2008
Financial crisis of 2007â2008 is widely considered to be the worst financial crisis since the Great Depression of 1930s. The origin of this big storm
dated back to the high home prices of the United States. After America's entire investment banking system was attacked, many industries such as auto
industry also went bankrupt. Unfortunately, it spread quickly to the whole world, causing huge damages to the global economy. Therefore, my study
will focus on the effects of the financial crisis of 2007â2008. Not only the effects on advanced and developing countries, but also the effects that can
still be felt today. When it comes to global financing, one of the most important things is to understand and learn to analyze different financial
incidents. This ability can assist people who are interested in finance or studying finance to comprehend current economic situation more deeply and
more detailedness. Financial crisis of 2007â2008 is a famous incident, and also a good example to illustrate some troublesome problems that still
exists today. Its effects on the global economy can be very specific to today's economic situations. Some countries suffered a lot while some countries
survived from the big storm. As a result, interpreting the effects of financial crisis of 2007â2008 is meaningful and educational to financial major
learners and amateurs.
Background/Review of the literature "The 2007â2008 crisis started off in August 2007 as a subprime mortgage crisis
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17. Asian Financial Crisis Essay
In the summer of 1997, an economic and currency crisis rocked the Asian markets. One by one, Southeast Asian countries such as Thailand, Indonesia,
Korea and Japan saw their economies crash in the wake of heavy foreign investment. An economic boom had made the region an attractive investment
opportunity for much of the 1990s. By 1997, however, domestic production and development had stalled, and foreign investors grew nervous. A
divestment run on the Thai baht triggered the crash. Large corporations, extremely dependent upon the confidence of foreign investors failed to meet
debt obligations and began to fail throughout Southeast Asia. Currencies throughout the region faltered and nosedived from their midâ1990s positions
of stability. The...show more content...
at the time, the largest finance company in the country ? alone. (Pesenti et al.,1998). This support of the highly leveraged private sector by the Thai
government lent the appearance of stability to an unstable system and attracted more foreign loans (to shore up the Thai economy) to Thai financial
institutions.
In February of 1997, the Thai company Somprasong was unable to make maintenance payments on its high level of foreign debt. This was the first
large default in Southeast Asia?s economic crash.
By midâMay of 1997, investor confidence in Thailand was so shaky that Singapore and Thailand had to step in to prop up the baht in the face of
?speculators who decided Thailand?s slowing economy and political instability meant it was time to sell.? (Chronology?). In the face of such
instability, Finance One (the largest finance company in Thailand) failed at the end of May. Most of the company?s lending was made up of risky
loans for real estate and stock market margin investments. Political instability resulted from the resignation of the Thai finance minister, which further
shook foreign investor confidence. ?The strong speculative attack on the baht that followed forced Thailand to let the currency float on July 2, a key
date in the chronology of the Asian crisis.? (Pesenti et al., 1998). Once the government was no longer
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18. Market crashes are nearly as old as the invention of money itself. But, as Gillian Tett underlines in Fool's Gold, "the latest financial crisis stands out
due to its sheer size". Economists estimate total losses could sum up to $2000 to $4000 billion, a number surprisingly not dissimilar to the British
Gross Domestic Product. In its postâmortem, the selfâinflicted disaster has commonly brought to light the question: "Did bankers, regulators and
rating agencies fail to see the flaws, or did they fail to care?" Importantly, it has also created a hunt for scapegoats and quick fixes.
Many Republicans and industry lobbyists have insisted that the financial meltdown would not have been nearly as bad if not for the deadly FairâValue
Accounting...show more content...
However, during the financial crisis, the application of the accounting standards was very different, and did not demand pure FVA.
Firstly, the writeâdowns were not as apparent as they seemed. Due to the mixed attribute model, firms were allowed to choose the measurement
attribute they desired for a position through how they classified the position. During the crisis, banks did indeed utilize these safeguards and discretion
built into FVA on their mortgageâbased securities. This resulted in the reâclassification of many fairâvalue assets into other categories in which weaker
impairment standards were applied. Hence, most bank financial assets were valued at amortized historic costs on their balance sheets. With only
tradingâtype operations reported under fair value principles . This implies that FVA standards would have made little difference in a bank's balance
sheets and regulatory capital ratios. For the same reason, writtenâdown values were also barely understatements. If anything, they were in fact
overstatements as banks had the individual discretion in determining fair value. Lastly, FVA standards also allowed the use of valuation models in the
calculation of fair values when markets become inactive, and stated that market prices from forced sales should not be used. Hence FVA should have
mitigated contagion effects, and actually protected institutions against negative spillâovers from distressed banks respectively. In a
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19. The Global Financial Crisis And The Crisis Essay
Introduction
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 the government policies made backfired and escalated the
problem even further.
Subprime Mortgages
The housing market crash, which broke out in the United States in 2007, was caused by high risk subprime mortgages. The subprime mortgage crisis
resulted in a sudden reduction in money and credit availability from banks and other lending institutions, which was referred to as a "credit crunch."
The "credit crunch" and its effect spread across the United States and further on to other countries across the world. The "credit crunch" caused a
collapse in the housing markets, stock markets and major financial institutions across the globe.
Subprime
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20. Essay on Financial Crisis of 2008 Analysis
In 2008, the US experienced the traumatic chaos of a financial downturn, whose effects rippled throughout Europe and Asia. Many economists
consider it the worst crisis since the Great Depression, and its alarming results are still seen today, a long six years later. Truly, the recession's
daunting size and formidable wake have left no one untouched and can only beg the question: could it have been prevented? The causes are manifold,
but can be found substantially rooted in illogical investments and greedy schemes. Before any of the risky moneymaking endeavors, investors
traditionally would have gone to the US Federal Reserve to buy treasury bills, a safe and profitable investment. Later, when interest rates were lowered
to only 1% in...show more content...
The banks then created a new ideaâlinking investors to homeowners through mortgages. Ordinarily, a mortgage broker would connect a houseâbuying
family to a mortgage lender, who would then supply them with a mortgage. In this system, everyone is happyâthe mortgage broker earns a handsome
commission, the mortgage lender earns a new mortgage, and the family is now a homeowner in a market of increasing housing prices.
In the new system, an investment banker buys the mortgage from the lender, borrowing millions of dollars to buy thousands of mortgages, and every
month he gets payments from homeowners for each of the mortgages. The banker then consolidates all the mortgages and splits the final product into
three sections: safe, okay, and risky mortgages, which make up a collateralized debt obligation (CDO). As homeowners pay their mortgages, money
flows into each of the sections, with the safe filling first and the risky filling last, contributing to their respective names. Credit agencies stamp the top
two safer mortgages with a triple A or triple B rating, which are then be sold to investors who want a safe mortgage, while the risky slice is sold to
hedge funds who want a risky investment. The bankers make millions, pay back their loans, and investors also make a worthwhile investment. So
pleased are the investors, however, that they want more. Unfortunately, back at the beginning of the cycle, the mortgage broker can no longer find
qualified mortgagers
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