.Subprime Mortgage Crisis

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Table of Contents

INTRODUCTION1
Chapter One LITERATURE REVIEW4
1.1 Background of the Financial Crisis4
1.2 Causes of the Financial Crisis4
Chapter Two AN ANALYSIS OF A TYPICAL CRISIS – SUBPRIME CRISIS6 2.1 A Brief Introduction6
2.2 Reasons for Subprime Crisis7
2.2.1 The Loosening of Credit Conditions7
2.2.3 The Market Rate Rising7
2.2.4 The Housing Prices Rising and Falling8
2.3 Measures Taken by U.S.9
2.3.1 Financial aid package9
2.3.2 An Expansionary Fiscal Policy9
2.3.3 The fed's unconventional monetary policy11
Chapter Three MAJOR EFFECTS OF THE COUNTERMEARSURES TO ADDRESS FINANCIAL CRISIS AND THE PROSPECT OF WORLD FINANCIAL CRISIS14 3.1 The Major Effects of Countermeasures Taken by U.S.14 3.2 The Prospect of World Financial Crisis16

Chapter Four THE ENLIGHTENMENTS TO CHINA IN COPYING WITH FUTURE FINANCIAL CRISIS18 CONCLUSION24
WORKS CITED25
ACKNOWLEDGEMENTS27

INTRODUCTION

The U.S subprime mortgage crisis surfaced since February 2007. In the next one year, the risk of subprime has being exposed overall, and finally triggered a global financial crisis. It not only made loss on American economic development, but also exploded to other mature as well as budding market economy countries through global financial transmission mechanism rapidly. With spreading to some economic fields such as automotive, transportation, international oil price of the energy sector entities, it has caused a lot of enormous bad impact on the world economy. Therefore, it is of utmost necessities for us to discern the influences on China economic development and the cause of formation, discuss the measures the governments have taken. Developed countries in the United States adopted the monetary policy of cutting interest rates and pouring a large amount of money into financial institutions in order to ease the international monetary tightening. What should China and other budding countries do? There are lots of research works, including causes of financial crisis, influences on countries, measures the world major economics have taken, which have been done by scholars and researchers. However, the research is not systematic, the author has the intention to study more in this field. This paper then aims to find out the measures the world major economies taken to address financial crisis and its lessons to China. Since the present paper aims to find out what measures have been taken by the U.S. to address the present financial crisis and the effects of these measures, then, draw a conclusion about the enlightenments to China in coping with future financial crisis , a lot of research, investigation, comparison and analysis should be carried out, therefore, the main methods used in this research involve documents collection, literature review, internet investigation, etc. Meanwhile, some famous speeches and data in news papers are collected and quoted to set examples, aiming to support the points in this thesis. This thesis consists of four chapters. For the Chapter one, before the burst of subprime crisis, the financial market hit by catastrophic developments that had strarted earlier in 2007 with problems in the per formance of subprime mortgages in the United States. The financial crisis is the resultant of a multiplicity of factors. It has serious implications for the global economy. The United States’s housing market emerged bubble economy, then the crisis explored to some major economical field, it has exposed pervasive weaknesses in financial industry regulation and the global financial system. In the Chapter two, because of the low interest rates and large inflows of foreign funds created easy credit conditions for a number of years prior to the crisis. The combination of easy credit and money inflow contributed to the United States housing bubble.. The shadow banking system leads to the financial crisis...
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