The Global Economic Meltdown

Topics: Subprime mortgage crisis, Economics, Investment Pages: 4 (1311 words) Published: September 7, 2010
Economies of the world all have their periods of rise and fall. No economy can experience total stability over a period of time- there must be some forms of rise or fall in the stability of the economy.

Today, virtually every country in the world is affected by what happens in other countries. Some of these effects are a result of political events, such as the overthrow of one government in favor of another. But a great deal of the interdependence among the nations is economic in nature, based on the production and trading of goods and services. This interdependence among nations is attributed to the world economy. Hence, Global economy can be said to be the interdependent economies of the world's nations, regarded as a single economic system.

As a result of the interdependence between economies of the world, there now is a cause-effect relationship between what happens in one country and the state of other countries.
The global financial crisis, brewing for a while, really started to show its effects in the middle of 2007 and into 2008. Around the world stock markets have fallen, large financial institutions collapsed or were bought out, and governments in even the wealthiest nations had to come up with rescue packages to bail out their financial systems.

The root of the crisis is in banking rather than in securities or foreign exchange. The crisis started in the U.S in august 2007 with sub-prime mortgage crisis and households found it increasingly difficult in making higher payment on adjustable mortgages. The crisis spread to Europe and has become global with countries not originally affected now experiencing second-round effects.

Following a period of economic boom, a financial bubble—global in scope—has now burst. However, what people are concerned about is that those responsible for the financial problems are the ones being bailed out, while a global financial meltdown will affect the livelihoods of almost everyone...
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