[SERIES 4/4] The Global Financial Crisis (2007 - 2009)
from the Frederic Mishkin's The Economics of Money, Banking, and Financial Markets
Financial Crises on Advanced Economies Chapter
Outline:
SERIES 1: Factors Causing Financial Crises
SERIES 2: Dynamics of Financial Crises in Advanced Economies
Series 3: The Great Depression
SERIES 4: The Global Financial Crisis of 2007 - 2009 (The Great Recession)
Other Sources:
The Causes and Effects of the 2008 Financial Crisis
https://www.youtube.com/watch?v=N9YLta5Tr2A
[SERIES 4/4] The Global Financial Crisis (2007 - 2009)
from the Frederic Mishkin's The Economics of Money, Banking, and Financial Markets
Financial Crises on Advanced Economies Chapter
Outline:
SERIES 1: Factors Causing Financial Crises
SERIES 2: Dynamics of Financial Crises in Advanced Economies
Series 3: The Great Depression
SERIES 4: The Global Financial Crisis of 2007 - 2009 (The Great Recession)
Other Sources:
The Causes and Effects of the 2008 Financial Crisis
https://www.youtube.com/watch?v=N9YLta5Tr2A
This is a simple and clear overview of what the credit crunch is, what caused it and the current status of the financial system with special focus on hte Irish situation.
pictorial representation of sub prime crisis. How sub prime crisis happened. Simple and easily understood way. Investment banking,motgages,how it backfired,snapshot of subprime crisis 2008,explanation of subprime crisis,.Why real estate sector lost its boom in US.
This paper is a summary of press clippings gleaned from Internet during the period April to July 2008. This exercise was performed to provide a quick summary of the US credit crisis at that particular point in time / 2nd quarter 2008. The paper was presented to a non native English speaking European audience consisting primarily of insolvency judges July 3rd 2008 in Paris.
I made this when I was in third year of my college.
This was my attempt to describe the subprime mortgage crisis that lead to the financial meltdown in 2008.
Bubble spotting - Subprime Mortgage crisis / Housing bubble 2007-2008Benjamin Van As
In the early to mid 2000s a housing bubble was created due to easy access to credit. The fall-out once investment bubble popped nearly brought the banking sector to its knees
This short presentation (part of a series on bubbles) explained what happened
This is a simple and clear overview of what the credit crunch is, what caused it and the current status of the financial system with special focus on hte Irish situation.
pictorial representation of sub prime crisis. How sub prime crisis happened. Simple and easily understood way. Investment banking,motgages,how it backfired,snapshot of subprime crisis 2008,explanation of subprime crisis,.Why real estate sector lost its boom in US.
This paper is a summary of press clippings gleaned from Internet during the period April to July 2008. This exercise was performed to provide a quick summary of the US credit crisis at that particular point in time / 2nd quarter 2008. The paper was presented to a non native English speaking European audience consisting primarily of insolvency judges July 3rd 2008 in Paris.
I made this when I was in third year of my college.
This was my attempt to describe the subprime mortgage crisis that lead to the financial meltdown in 2008.
Bubble spotting - Subprime Mortgage crisis / Housing bubble 2007-2008Benjamin Van As
In the early to mid 2000s a housing bubble was created due to easy access to credit. The fall-out once investment bubble popped nearly brought the banking sector to its knees
This short presentation (part of a series on bubbles) explained what happened
2008 Global CrisisStarting in 2005, the Federal Reserve perc.docxdomenicacullison
2008 Global Crisis
Starting in 2005, the Federal Reserve perceived that its excessively broad financial strategy had made the potential for higher expansion. It properly started to fix arrangement through its standard technique of rising it’s focused on interest rate. A key initial phase in the money policy procedure includes the making of bank reserves; these are deposits that banks keep at the Fed. At whatever point anybody other than the Federal Reserve buys anything they have to have cash to pay for them. The Fed is diverse. It has the special capacity to pay for its purchases by informing banks that it has expanded their bank saves by whatever sum is important to pay for its purchases. https://youressaymarket.com/im-working-on-a-risk-management-case-study-and-need-support-to-help-me-study-sc/
Making more bank reserves has a tendency to give banks more money that empowers them to make credits and ventures. This procedure has a tendency to add to the cash supply, which inevitably expands the rate of expenditure. After some time, an increment in spending well beyond the capacity of an economy to create products and administrations prompts inflation.
From 2001 to 2005, there was an increment of bank reserves in the Federal Reserve by about 20%. In the same period, other measures of money such as monetary base and currency increased rapidly. This increase in funds led to an increase in the rate of spending that consequently led to the increase in the dollar GDP. This made the Federal Reserve to ease its monetary policy by reducing the bank reserves; this caused the indicators or measures of money to slow dramatically. This caused the dollar GPD to slow. The slowdown in growth of money decreased the rate of spending in the United States. The Federal Reserve continued to drain or remove the bank reserves from the system, and this fuelled the financial crisis.
Keynes, the famous economist, introduced what is commonly known as “financial stimulus.” The basics of financial stimulus is the people who have more disposable income will lend the money to the government, and the government will give it to those who do not have to boost spending. Many have argued that this is true and have not questioned its validity, while others argue that the stimulus is not huge enough to cause an economic downturn. Before the 2008 financial crisis, the United States was practicing this theory widely as postulated by Keynes. https://weassistessays.com/learning-outcomes-assessed-this-part-please-refer-to-learning-materials-for-co/
In reality, the financial stimulus policy is a drawback to the economy. For instance, in a year, the United States produces products worth $13 trillion, therefore they receive the same in income. The Population will save approximately 10% of this in order to purchase capital goods that will bolster future production. The government of the United States used to borrow this 10% meant for capital goods and pump it to the economy and most o.
Discussion 1The Federal Reserves were using practices that t.docxduketjoy27252
Discussion 1
The Federal Reserves were using practices that they haven't used since the Great Depression. “First, the Fed extended credit to nonbank financial firms, which was the first time since the Great Depression that entities outside of the Federal Reserve System could borrow directly from the Fed”(Amacher Pate 2012). They did this so that all the small firms didn't fall because of the economy. “The Fed also purchased assets and loans from firms deemed "too big to fail." The purchases of mortgage-backed securities, loans ranging from millions to billions to financial firms like American International Group, and guarantees of the assets of Citigroup and Bank of America were all seen as unconventional practices of the Fed”(Amacher Pate 2012). That way they would have the money to used to help stabilize their financial state.
To support the firms that the Federal Reserve thought was to big to fail, they passed the Dodd-Frank Wall Street Reform and Consumer Protection Act. “On July 21, 2010, President Barack Obama signed the Dodd–Frank Wall Street Reform and Consumer Protection Act into law, which permanently raises the current standard maximum deposit insurance amount (SMDIA) to $250,000”(Amacher Pate 2012). This way when there will be less likely for the banks to be in a crisis because they would have more money to work with.
I think they did what they thought they had to do to keep the economy from collapsing. If everything started falling apart and they couldn't come up with a solution, they would have bigger problems to deal with than unconventional practices.
Amacher, R., Pate, J. 2012. Principles of Macroeconomics. San Diego, CA. Bridgepoint Education Inc.
The Federal Reserve was established to provide bank safety. Subsequently, the Federal Deposit Insurance Corporation (FDIC) was created to provide protection to bank depositors from bank failures. According to text, “it is important to allow unsuccessful firms to fail and leave the industry if the market system is to function effectively” (Amacher, 2012, p. 343). In response to the numerous bank failures, the FDIC implemented several changes. First, it mandated that all accounts that are not interest bearing to be insured in full. Banks were using these funds to issue high interest loans, while paying minimal interest to funds that were deposited. Next, the Federal Reserve System was divided into 12 districts. This method ensured that control of the banks was not consolidated at a national level. At this point, the Federal Reserve can also adjust the interest rates to encourage or discourage banks from lending money. Also, Congress passed the Dodd–Frank Wall Street Reform and Consumer Protection Act. This was the response for organizations who were deemed “too big to fail.” This law required banks to have a high ratios of capital reserves, as well as reduce their penchant for risk tasking.
Travis
References
Amacher, R., Pate, J., (2012).Principles of Macroeconomics. San Diego.
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2. What was the reason of financial crisis in
2008?
The financial crisis started in united states, from 2007 to
2008 . There are many reasons why economists think
the crisis happened. Most economists believe that it
started From 1997 until 2006, people bought expensive
house, even though they did not have enough money
for it. Economist Milton Friedman said that the Great
Depression was worsened because the Federal Reserve
printed out less money than usual.
3. Since the money had come from other countries, it
was easy to have good credit. People used this
credit for expensive home loans. This created an
economic bubble which caused the houses' prices
to raise. Because they had a lot of money, the
loaning companies made it easier to get a loan,
even if the borrower didn't have a good credit
history. These loans are known as subprime loans
4. Targeting industries behind American
financial crisis?
The targeting industries which include in, Lehman
Brothers went bankrupt. Merrill Lynch, AIG, Freddie
Mac, Fannie Mae , Royal Bank of Scotland, Bradford
& Bingley, Fortis, Hypo and Alliance & Leicester all
came within a whisker of doing so and had to be
rescued.
5. What were the main default of financial
crisis?
It was securitization. Or greed. Or deregulation. Or any
number of other things that, truth be told, probably did
play a role in the unusually severe economic downturn.
Securitization: Securitization is the process of taking
an illiquid asset, or group of assets, and through
financial engineering, transforming them into a security.
6. For example : is a mortgage-backed security (MBS), which is
a type of asset-backed security that is secured by a collection
of mortgage.
Greed: greed is usually described as an irresistible craving to possess
more of something (money, material goods) than one actually needs.
Deregulation: deregulation is the reduction or elimination of
government power in a particular industry, usually enacted to create
more competition within the industry.
7. Impact of financial crisis on the world
banking sector?
The financial crisis affected the banking sector by causing
banks to lose money on mortgage defaults, interbank lending
to freeze, and credit to consumers and businesses to dry up.
For the much longer term, the financial crisis impacted banking
by spawning new regulatory actions internationally through
Basel III and in the United States through the Dodd-Frank Wall
Street Reform and Consumer Protection Act.
8. When increasing numbers of U.S. consumers
defaulted on their mortgage loans, U.S. banks lost
money on the loans, and so did banks in other
countries. Banks stopped lending to each other, and
it became tougher for consumers and businesses to
get credit. Meanwhile, the ultimate impact of the
financial crisis keeps unfolding.
9. Difference between regulated and
deregulated banking system how they
work?
Regulation: Regulation refers to controlling business through
laws passed by the government. To protect the interests of
consumers, government institutes regulatory laws.
Deregulation: deregulation deals with the elimination of
government laws and rules. These laws, or removal of them,
impact consumer and business activities such as obtaining
loans, importing supplies and selling products
10. Is Pakistan system is regulated or
deregulated yes or not?
The Pakistan system system is regulated
in which higher authorties regulated
according the law of Pakistan.
11. Discuss the impact of financial crisis on
Pakistan investment banks?
“the Pakistani banking system has, over the last decade,
gradually evolved from a weak state-owned to a slightly
improved and active private sector motivated system. But as
of end 2008, data from the banking sector confirms a slow
down. As of October 2008, total deposits fell from Rs 3.77
trillion in September to Rs 3.67 trillion. Provisions for losses
over the same period went up from Rs 173 billion in
September to Rs178.9 billion in October.
12. The global crisis has really fuel to the fire. There was a time
window earlier this year to address all this, and we missed it.”
The drying up of credit internationally has hit Pakistan hard
with the banking system suffering a severe liquidity problem.
Overnight call rates rises so much and its ranging from 32 to
40 percentage.