Global Economic Crisis

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The Global Economic Crisis 1

THE GLOBAL CEONOMIC CRISIS: Causes and Consequences

The Global Economic Crisis 2

The world has confronted numerous economic crises in the history which have caused a decline in international commodity trade, bankruptcies in almost all sectors of activity. However, the September-October 2008 Stock market crash has proven to be far beyond the preceding calamities. The financial giants have been able to manipulate the stock market and resultantly have devastated the production of goods and services. As a result, large and established business entities have been destroyed. The crash is said to be a product of financial deregulation and macroeconomic reforms (Chossudovsky, M., Marshal, A.G, 2009). As a result, developed countries found themselves in the worst kind of recession. The causes of the current global economic crisis are myriad as it is deemed that its reasons date back to the major transformations in the world economy in 1980s. However, there are reasons that are believed to have triggered the meltdown of the stock market. One of the major causes is the use of mortgage derivative products in selling a product that disguised the risks associated with the product. These were introduced as hedging technique and became commonly used lending criteria. The mortgages were also commonly sold for repayments of borrowings. People realized that the value of mortgage was more than that of the associated asset and defaults on mortgages became common. This resulted in a slum in property prices ( Another reason that has been a part of discussions is the government policies regarding regulation of the finance industry. The crisis would have been avoided if the Government had adopted a proactive approach towards the regulation of finance industry. Using such an approach would also have helped in verification of mortgages. The current Global Economic crisis has led to...
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