1) What were the main causes of the most recent global financial crisis? The biggest cause of the global financial crisis stems from the use of mortgages and government overspending. Mortgages were fixed for 20 or 30 years and people began not being able to make payments on the mortgages. Property ownership became a trap. Restrictions were lifted on American banks, and they began to raise savings rates to attract new customers. Then they started loaning more and more, as the loans grew the customers were less ideal. They started loaning to people who couldn't afford the loans, and the government had to bail them out. The government was forced to print more money than they had. Also, deregulation led to increased savings rates, so savers deposits were used to take out even more loans. Loan sharks began to see this as a great opportunity to make money. These savers deposits were still insured by the government. In the long run, even though the federal government had to pick up the bill, the tax payers ended up paying for it. The full cost of the crisis was $153 billion.
2) What were the causes of the other financial crisis described in the video, including the ones in the loans and savings association, oil industry, and Argentina
The financial crisis in Argentina was caused mostly by increased government spending during the civil war in 1989. The war was the monetary system in Argentina against Britain. The value of the dollar in Argentina fell 140 percent during the time of the war. In order to try and fix this problem banks started selling bonds to the public and the government started printing more money. This only made the issue worse, because eventually the government ran out of paper to print more money. At one point the inflation rate rose 100 percent in one month.
- Double digit inflation and high interests rates
- Bad Investments in Property Development
- Borrowing from other countries