Essay - Financial Crisis
Paper: Financial Management
The greediness of the financial world
An essay about the causes and consequences of the financial crisis
Financial Management
November 2011
Marko Iskic 686798
Lucas Lemmens 969374
Peter Zevenbergen 813259
Table of contents Introduction 3 The causes of the economic crisis 4 The consequences of the economic crisis 7 How to fix the economic crisis 9 References 11
Introduction
At this very moment the world is battling an global financial crisis. The current financial recession is the worst since the great depression in the 1930s. The end of 2007 marks the start of our current crisis. The global economy starts showing major flaws in the system. Lack of control and regulation causes large corporations and banks which seemed too big to fail to default, instantly evaporating billions of dollars in stock. Many people lost their jobs, causing mortgages, ill and (high) risk debt to be left unpaid. Leading to a vicious cycle which can only seem to go downwards.
But how did we get to this point of no return? What were the causes of the economic crisis? What are the consequences? And how should we overcome this recession? These questions and more will be answered in this paper.
The causes of the economic crisis Iceland was a stable country with a high standard of living, low unemployment and government debt. But in 2000, the government of Iceland started financial deregulation. They privatized their three largest banks, which would have enormous consequences. They borrowed huge amounts of money (ten times the size of Iceland 's economy) and spent it for a big part on their selves. Rating agencies and American accounting firms audited the Icelandic banks and found out nothing was wrong. The banks collapsed in 2008, lots of people lost their savings, and the unemployment in Iceland tripled in six months. The British and our own Dutch government demanded over 100% of Icelandic GDP to compensate their duped citizens.
The greediness of the financial world
An essay about the causes and consequences of the financial crisis
Financial Management
November 2011
Marko Iskic 686798
Lucas Lemmens 969374
Peter Zevenbergen 813259
Table of contents Introduction 3 The causes of the economic crisis 4 The consequences of the economic crisis 7 How to fix the economic crisis 9 References 11
Introduction
At this very moment the world is battling an global financial crisis. The current financial recession is the worst since the great depression in the 1930s. The end of 2007 marks the start of our current crisis. The global economy starts showing major flaws in the system. Lack of control and regulation causes large corporations and banks which seemed too big to fail to default, instantly evaporating billions of dollars in stock. Many people lost their jobs, causing mortgages, ill and (high) risk debt to be left unpaid. Leading to a vicious cycle which can only seem to go downwards.
But how did we get to this point of no return? What were the causes of the economic crisis? What are the consequences? And how should we overcome this recession? These questions and more will be answered in this paper.
The causes of the economic crisis Iceland was a stable country with a high standard of living, low unemployment and government debt. But in 2000, the government of Iceland started financial deregulation. They privatized their three largest banks, which would have enormous consequences. They borrowed huge amounts of money (ten times the size of Iceland 's economy) and spent it for a big part on their selves. Rating agencies and American accounting firms audited the Icelandic banks and found out nothing was wrong. The banks collapsed in 2008, lots of people lost their savings, and the unemployment in Iceland tripled in six months. The British and our own Dutch government demanded over 100% of Icelandic GDP to compensate their duped citizens.
References: Bernanke, B.S. (2010). Monetary policy and the housing bubble. Retrieved from http://www.federalreserve.gov/newsevents/speech/bernanke20100103a.htm?source=myrealestatemoney.com/RENEWS Danielsson, J Delarue, S. & Seynaeve, M. (2010). Oorzaken en gevolgen van de economische crisis, en aanbevelingen naar de toekomst: een verkenning. Retrieved from http://lib.ugent.be/fulltxt/RUG01/001/459/543/RUG01-001459543_2011_0001_AC.pdf Ferguson, C Zingales, L. (2008). Causes and effects of the Lehman Brothers bankruptcy. Retrieved from http://research.chicagobooth.edu/igm/docs/Zingales-Testimonies.pdf Seguino S Verick, S. & Islam, I. (2010) The Great Recession of 2008-2009: Causes, Consequences and Policy Responses. Retrieved from http://ftp.iza.org/dp4934.pdf -------------------------------------------- [ 1 ]. Danielsson, J. (2009). The first casualty of the crisis: Iceland. [ 2 ]. Zingales, L. (2008). Causes and effects of the Lehman Brothers bankruptcy [ 3 ] [ 4 ]. Ferguson, C. (2010). Inside Job [DVD] [ 5 ] [ 6 ]. Bernanke, B.S. (2010). Monetary policy and the housing bubble [ 7 ] [ 8 ]. Taibbi, M. (2009). The great American bubble machine