The Way Out of the Global Financial Crisis

Topics: Financial crisis, Unemployment, United States housing bubble Pages: 9 (2935 words) Published: August 24, 2013
The Way Out of the Global Financial Crisis: A Critical Justification of Causes and Effects.


Table of Contents
Introduction – The Global Economic Crisis4
Major corporate bankruptcies and country collapses5
Rising unemployment7
Downturns in economies in economic growth and collapses of the trade8
Impact on Asian Countries and Sri Lanka8
The way out of the crisis9
Works Cited10
Annex 0111
Annex 0212

The widespread business contraction is one of the topical issues today. The global recession is the cause for this, and that is a generally accepted fact. Not only the business contraction, but also the increases in unemployment and shrinking government revenues are also newsworthy. However, it is accepted that, large economies have started recovering from the crisis, unemployment is a problem that has been solved yet, (Nanto, 2009). Numerous banks and individual households still face problems in restoring their balance sheets. As a definite remedy, industrialized as well as emerging economies (developing countries) constitute financial rescue packages such as, American Recovery and Reinvestment Act of 2009 (P.L. 111-5), (Nanto, 2009). This note details about one of the fundamental dilemmas which discussed all over the world at present. Simply stated, this is the world economic crisis, which is also known as the world financial crisis which began in the latter part of 2007. More specifically, this was known as many economists to be the worst economic crisis since the Great Depression of the 1930s. Mainly, the collapses of large corporate and countries, as well as downturns in economies in economic growth, increasing unemployment, and collapses of the trade can be highlighted as the fundamental causes for the crisis. Given that, many large economies have turned into chaos as an awful repercussion of the crisis. However, many economists as well as countries as whole addressed remedies to prevent those so called negative repercussions; it is a generally accepted fact that, those remedies were not totally successful. This note discusses the above addressed issue in detail. Thus, we structured this note elaborating the notion of World Economic Crisis at the outset, and we postulates some of the major corporate collapses in the world. Thereafter, we detail about the major downturns of the economic growth as well as high unemployment problems occurred as causes for the core discussion. More focally, we develop facts about the impacts of the crisis toward the Sri Lankan economic and the financial sector as well. Finally, we strive to postulate, the feasibility of the remedies addressed to the phenomenon (Global Economic Crisis) discussed and we build an argument with a critical justification where, “there is no way Sri Lanka can keep away from the effects of economic recession but certainly the authorities could think and act sensibly towards finding ways of minimizing the impact by adopting proper policies. Most of all, the important thing is to adopt proactive policies”. Introduction – The Global Economic Crisis

In this section we intend to talk about how the world economic crisis emerged and some of the major players in this crisis. Perhaps most notably, this section does not encompass all the incidents about the crisis; we bring out the most important aspects to develop the core argument of the note. Many are suggesting that the major cause or the trigger for the financial crisis is the United States housing bubble which peaked in the periods of 2005-2006. In the early 2006, housing prices peaked and started to decline in 2006 and 2007, and reached new lows in 2012. Adding to that on December 30th, 2008 Case-Shiller home price index reported its largest price drop in its history (See figure 01, annexes: Median and Average Sales Prices of New Homes Sold in United States 1963-2008). As a repercussion, the mortgage house pricing was also started gradually rising. To...

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International Monetary Fund (IMF), 2009. From recession to recovery: how soon and how strong? Chapter 3 in IMF. World Economic Outlook (WEO) Crisis and Recovery, Washington, D.C..
Nanto, D.K., 2009. The Global Financial Crisis: Analysis and Policy Implications. [Online] Congressional Research Service Available at: [Accessed 01 May 2013].
Organization for Economic Co-operation and Development (OECD), 2008. OECD Employment Outlook. OECD, Paris.
Reinhart, Carmen, M., Kenneth, S. & Rogoff, 2008. Is the 2007 U.S. Subprime Crisis So Different? An International Historical Comparison. American Economic Review, 98(2), pp.339–44.
Verick, S., 2009. Who Is Hit Hardest during a Financial Crisis? The Vulnerability of Young Men and Women to Unemployment in an Economic Downturn. Institute for the Study of Labor, IZA DP No. 4359.
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Source: Reinhart, Carmen, M., Kenneth, S. & Rogoff, 2008. Is the 2007 U.S. Subprime Crisis So Different? An International Historical Comparison. American Economic Review, 98(2), pp.339–44.
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