Global Economic Crisis
Throughout the history of the U.S. and the world at large, financial crises and the resultant economic recessions have occurred unerringly recurrently. In fact, the phenomenon has become so common that some think of such crises as parts of economic systems of the major world powers. The most recent one is the 2008 financial crisis that brought about the world economic recession. The recession resulted in over 4.1 trillion dollars in losses, increased poverty, unemployment numbers climbing to over 10% in the U.S. and quite higher in major European economies, major banks collapsed and several stock markets crashed. In fact, American investors alone lost over forty percent of their savings value. Housing prices dropped sharply from the high recorded previously in 2006. The 2008 crisis also resulted in decline in manufacturing, reduction of world trade, decrease in consumer spending, and many negative effects. Because of the importance of finance to most of the major dimensions of globalization, matters such as trade, migration, human rights, ethnic conflicts, inequality, crime, disease, democracy and the environment are affected. Moreover, the latest financial crisis affected some nations more than others, thus creating power shifts among nations, particularly between the U.S. and China. The E.U (European Union) debated over the degree to which their governments should bail out banks and debated remedial measures needed in their financial systems. The political, economic, financial and social differences continue to be influenced to date, with issues such as the Greek debt crisis. In the U.S., citizens protested against financial inequality resulting in movements such as "occupy Wall Street" gaining popularity in the latter days of the financial crisis (Claessens & Kose, 2013).
The global impact of the 2008/2009 financial crisis shows the importance of having a comprehensive understanding of what brings about such crises, what are their effects and what can be done to prevent them or at least mitigate their effects. The latest crisis resulted in shifts in financial and economic policies, making experts delve into studies and researches to find the best responses as the effects of the crisis continue to be felt world over years after the phenomenon (Tcherneva, 2012; Arestis, Charles & Fontana, 2013).
About global economic crisis
The causes of economic crises are as complicated as the crises themselves and the people behind them. Since the early 17th century, there have been about 60 recorded financial crises. People have always been driven by greed and their obsession for money and thus have come up with legal and illegal ways of obtaining lots of it. Moreover, just as the majority of people spend more than what they earn, governments too do so, resulting in huge debts that de-stabilise financial systems. Since it is not possible to get to the actual causes of world economic crises unerringly, we can only speculate the causes behind the latest one and they include: (1) very low interest rates; (2) subprime loans particularly for the mortgage market; (3) Housing boom speculation; (4) huge pay checks for executives; (5) the advent of complicated financial innovations associated with rapid changes in the ICT industry and (6) deregulation of the financial markets (Claessens & Kose, 2013; Tcherneva, 2012). A number of financial crises have always come after credit and asset booms. Several theories and observations have supported this. However, governments or financial regulators explanations for why they don't intervene until these credit booms or asset bubbles are left to continue until they become unsustainable and become crunches or busts has always not been satisfactory (Pfeffer, Danziger & Schoeni, 2013).
There are two types of financial crises: the first types are those which are classified utilizing strictly quantitative definitions and the second type are defined by using judgemental or quantitative analysis. The first type of crises include sudden stop and currency crises and the second type include banking and debt crises. Integration of the global economy means that the effects of these financial crises spread quickly around the world and the effects are often seen on different fronts. For instance, author Aluko (2008), noted that the debt crisis in the U.S. during the recent economic downturn resulted in amounts of foreign direct investments and other kinds of investments from Americans to other developing and developed countries reducing significantly. The economic downturn also caused the collapse of stock markets around the world (Olaniyi & Olabisi, 2011).
Methodology
The huge stock market fall in the early in the second quarter of the 2008/2009 financial year marked our first point of data collection....
Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.
Get Started Now