Fundamental of Economics
Analysis of “The Global Financial Crisis: Causes, Effects, Policies and Prospects” Dominick Salvatore, Journal of Politics & Society, Columbia University June 2010
Marija Nikolic December 2012
Global financial crises has brought into focus debate about decisions made by the countries which are leading economic forces, making them to reconsider past living standards and habits. With the aim to examine the causes, effects, policies and prospects for the financial crisis D.Salvatore published the article in June 2010. Additionally author in the same paper suggests reforms in the U.S. macroeconomic decisions as the prevention of future crises. This analysis will first give summary of the main points of the paper and then my personal opinion about the context and structure of the paper. The United States and Europe did almost everything possible to avoid the recession: introduced stimulus packages, lowered interest rates, capitalized banks but, their efforts only succeeded in preventing a deeper recession or depression. The outcome of the last financial crisis is evident to all: stock markets crashed all over the world in 2008, the capitalization of banks was cut by more than half, the entire U.S. investment banking sector as we had known it disappeared, all advanced countries fell into the “Great Recession” (the deepest of the post-war period), all of the most important and largest emerging market economies, with the exception of China, India, and Indonesia, fell into recession. However, despite the fact that they did not fell into recession China, India, and Indonesia need very high rates of growth to accommodate their large populations and to absorb their still significant subsistence sectors into the market economy. (Salvatore D, The Global Financial Crisis: Causes, Effects, Policies and Prospects, Journal of Politics & Society Columbia University (2010))
To find a solution first cause should be identified. Without the...
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