The Global Recession Ten Years Later

1. Briefly describe central banks’ response to global financial crisis.
When recessions and other economic problems strike, one of the main responses that is seen from the economies involved is a lowering of interest rates. Indeed, the governments make money cheaper for banks to borrow so that it spurs investment and growth. This, in turn, tends to help support or grow economies. There is also the use of quantitative easing and the issuing of bonds.
2. What is quantitative easing and what securities are used in the programs in the US, EU, Japan?
The ostensible inefficacy, at least on its own, of lowering interest rates and issuing bonds has led to the use of quantitative easing by countries like the United States and the European Union. Indeed, it is a way for a government to “pump money” into an economy. This happens when a government buys government bonds and other securities with cash that did not exist before. Indeed, the cash is solely electronic in nature but it does serve the purpose of swelling bank reserves. Like the lowering of interest rates, this is supposed to spur the banks to lend out more and more money to its customers (The Economist).
3. What is the intent behind negative interest rates in Japan and Europe?
The term “negative interest” may seem counterintuitive. Indeed, there is usually a cost associated with borrowing money. However, the negative rates in some countries mean that the central banks are paying the lower financial institutions to borrow money. The practice is losing its efficacy due to the aforementioned quantitative easing that is also in play in the global economy. It is to the point that bonds will have negative yields. However, even these negative yields are seen as attractive because there is often no other viable option to choose.
4. What makes interest rates go negative? (How are negative interest rates achieved?)
Negative interest rates are when target interest rates are configured with a negative value. This is obviously below the supposed limit of there being no interest (zero percent) (Forelle).
5. What are the effects of negative interest rates thus far? Are the observed effects in line with original expectations? What are the concerns among economists regarding negative/low interest rates?
However, it also has the effect of weakening the currency. This leads some investors to seeking out more valuable currencies in other countries. Regardless, there is mixed evidence as to whether all of this really helps or if it just makes things worse. The overall concern among economists is that the general practice is ineffective. However, there is also the concern that there is nothing else that could be done instead that would be effective (Forelle)
6. What is the state of major world economies 10 years after the crisis?
Ten years after the onset of the nastiest global economic crisis since the Great Depression in the 1930’s, one thing that is quite clear is that workers are in many ways continuing to shoulder the crisis. For example, there has been a growth of roughly 2.7 trillion pounds in the United Kingdom since 2007. However, all of that growth in wealth has gone to people over 45 years in age. There is an overall recovery across the board. It is plodding at times. However, not everyone is benefiting as much as would be desirable (Nixon). When looking at the European Union as a whole, the European Central Bank President, a man by the name of Mario Draghi, has recently said that the recovery is finally starting to “firm up”. Even so, he admits that current valuation is still fledgling despite the decade or so that has passed since the onset of the crisis. Janet Yellen, the Federal Reserve Chair in the United States, said much the same thing. However, both of the figures were mum on potential or planned economic or fiscal policy in the years to come (Cheng).

















Works Cited
Cheng, Evelyn. "ECB's Mario Draghi Says Global Recovery Is Firming Up, Euro Climbs."
CNBC. N.p., 2017. Web. 12 Sept. 2017.
Forelle, Charles. "Everything You Need To Know About Negative Rates." WSJ. N.p., 2016.
Web. 10 Sept. 2017.
Nixon, Simon. "Ten Years Later, Younger Workers Still Endure Costs Of The Crisis." WSJ. n.p.,
2017. Web. 10 Sept. 2017.
Rosenthal, Rachel, and Suryatapa Bhattacharya. "Bank Of Japan Risk: Running Out Of Bonds
To Buy." WSJ. N.p., 2017. Web. 10 Sept. 2017.
The Economist. "The Economist Explains - What Is Quantitative Easing?." Economist.com. N.p.,
2015. Web. 10 Sept. 2017.