The Effect That the Financial Crisis Has Had on the Global Economy.

Topics: Public finance, Recession, Great Depression Pages: 5 (1935 words) Published: March 20, 2013
The effect that the financial crisis has had on the global economy.

Financial crises ?

Due to lack of liquidity in the financial institution causes recession or depression in the economy. The situation occurs in which the value of financial assets or institutions drops promptly. Financial crises always concord with a panic or run n the banks, in this situation investors sells off their all assets keeping in mind that their values will go down and they also withdraw money from their saving accounts.

There are many ways for the cause of financial crises such as it can be caused by negative economic news. natural disasters or some other significant financial impact. This cause contraction in business activities leading to a self-reinforcing and boost of the crises.

What caused the global financial crises in US?
U.S economy was experiencing the worst crises since the great depression. This all started from the home mortgage, this market is called "subprime" mortgages, this is now beyond subprime to prime mortgages, corporate junk bonds, real estate and some other forms of debts. Total one-third of the bank capital was lost by the U.S banks. This crises led to sharp reduction in bank lending and causing severe recession in the U.S . economy. The global financial crises sounds like it hasn't affected the regular people, but the regular workers in the massive companies have been bankrupted and also became unemployed . Major cities and the towns in the Unites States are been decimated due to large employer in the area has gone out of business. There are various factor which generally points the reasons that trigged the global financial crises. One of the main factor behind the crises is mortgage derivative products. Risky mortgage were packed properly and sold to the investors and other banks as secure investment products. This packaging was gradually grew as lending criteria in the first five or six years of the twenty first century. Another factor which has blamed for the crises was widespread selling of the mortgages across the United States and the world to the people was not really afford to repay the borrowings. As more people started doing this the property prices fallen down and this caused bigger problem. The people found that the level of borrowing was above their level and they started default on their mortgages. Many people also have blamed the government regulation of the financial industry which is also one of the main reason for the global financial crises. It has been believed that if there was a more proactive regulation of the financial industry especially on mortgages were verified, then it can be prevented the crises from becoming as wide ranging as it was. U.S government was trying to recover from the repercussions of the crises and the level of national debts was increasing in the US and worldwide. How can we get out of this financial crises?

The global financial crises of early twenty first century was the most destructive and critical event to the economy of the United States and the worldwide economies. Many large companies have gone out of the business due to the result of the crises. Millions of people were fired from the jobs because of the effects of this crises. But finding the right solution was vital to get out of the crises Most of the people where worried about their families future from the crises of nation and international level. Those people who were still employed have shown that they are still struggling and trying to repay their loans and they have significantly cut down the amount the amount they were spending because of increased costs which they have from the borrowing on loans or credit card over the recent years. There must be a balance of the well government budget which can be operated very strictly with a recovery in consumer confidence and spending. Once the economy gets stable and all these factors start working correctly in the market, then...
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