Global Economic Crisis

In: Business and Management

Submitted By hebronzy
Words 4003
Pages 17
In the later part of 2008 the world observed what is being labeled the world financial crisis since the Great Depression of 1920-30. The initial indication of a severe financial melt-down appeared in October 9, 2007 when the Dow Jones Industrial Average set a record by closing at 14,047. One year later, the Dow was just above 8,000, after dropping 21% in the first nine days of October 2008. Major stock markets in other countries had plunged alongside the Dow. Credit markets were nearing paralysis. Companies began to lay off workers in droves and were forced to put off capital investments. Individual consumers were being denied loans for mortgages and college tuition. After the nine-day U.S. stock market plunge, the head of the International Monetary Fund (IMF) had some sobering words: “Intensifying solvency concerns about a number of the largest U.S.-based and European financial institutions have pushed the global financial system to the brink of systemic meltdown.”
It has been maintained that huge economy inequalities coupled with low rate of profit in the US economy contributed to an increased capital flow to the financial sector and the increasing provision of credit to US workers whose real incomes had declined. Under auspices of financial innovations, debt was sold in complex new financial products to investors. Cheap and apparently riskless lending drove the rising leverage of investments. ‘Securitization’ helped to spread the risks to global financial markets and deficient government regulation facilitated these developments. A huge asset bubble developed in the US housing sector and burst as a result of high interest rate. Consequently, the world witnessed massive waves of defaults, institutional insolvency and a severe credit crunch.

The global financial crisis led to the collapse of large financial institution, bailout of banks…...

Similar Documents

Global Crisis ,2008 Yıllık Raporu s.10. Anonim, , (25.05.2012) . Anonim, (Sources: Federal Reserve, Treasury, FDIC, CBO, White House Note: Figures as of November 16, 2009)(08.05.2012). ARIN, Tülay, “Asya Krizi ve Kriz Yönetiminde Hegemonya”, İktisat Dergisi, Ocak 1998, s. 5-18 ‘den aktaran Aytaç EKER ve diğerleri, “Devlet Borçları”, 4. Baskı, Ankara 2005, s. 111. Arslan, Mustafa, “1929 Büyük Buhranı ve 2007-2008 Küresel Krizi- Keynesyenizm Açısından Bir Karşılaştırma”, s. 71, . BARRO, J. Robert, “Economic Growth In East Asia Before And After The Financial Crisis”, Cambridge 2001, s. 1, . BDDK, “ABD Mortgage Krizi”, Çalışma Tebliği, Sayı:3/Ağustos 2008, s. 1, . Bilge, Orhan , “Ekonomik Krizlerin Yoksulluk Üzerindeki Etkileri”, Ankara 2009, s. 15, . Çakmak Şahin, Senem. “Meksika, Asya ve Türkiye Krizleri Üzerine Karşılaştırmalı Bir Değerlendirme”, Yıldız Teknik Üniversitesi İktisadi İdari Bilimler Fakültesi, Mülkiye Dergisi, Cilt:3, Sayı: 250 Ergenç, Yunus. ”Ekonomik Krizlerin......

Words: 8540 - Pages: 35

Counteracting the Global Economic Crisis: Values, Institutions, Policies.

...Counteracting the global economic crisis: values, institutions, policies. When talking about the broad and complicated subject of economic crisis, it is important to mention ideas concerning neutralization of its consequences and prevention of future calamities. The current disturbance in the global economy requires not only to understand how it was initiated, but also how to counteract and draw conclusions from it. The Chinese proverb says: “may you live in interesting times.” These times are now- financial markets are in turmoil, China is rising as economic power, young people from Europe and America are protesting against, what they see as ineffective government and regulations. In next years the world will change even more- also thanks to changes, that will be made as an answer to the global economic crisis- in terms of values, necessary institutions and policies. The first step toward ending the crisis is to introduce new regulations, that would stabilize the market. Since 1980’s the American financial market has been experiencing a long period of deregulation. Although the obvious results of this move- the example can be the deregulation of savings and loans companies, that led to crisis in 1989, the process continued. Decade later, in 1990’s the new market instruments- derivatives, became increasingly popular. Although, their allies argued that they would stabilize the market, the opposite happened. Any attempt to regulate hedge funds was cut out by......

Words: 902 - Pages: 4

Economic Crisis

...Depot’s desir details. Ace’s Hardware SWOT Matrix Although Ace’s Hardware has a number of core competencies, they hold many weaknesses that sho strategies, as shown in Appendix B. Weaknesses considered necessary to be addressed include cus 5/25/2012 Strategic Audit of Lowe’s Companies, Inc. | Explore Page 5 of 70 honoring rebates and their inability to honor guarantees of their return policy. Customer service is requiring ample consideration by Ace’s management team. Macro-economic Factors & Lowe’s The economic environment of the United States since the beginning of the current recession in 200 performance and demand for the home improvement industry. However, recent news from CNNMo information for the industry with the published projection of a 9.1% increase in the first quarter of 2011).  Nonetheless, the macro-economic conditions reflect an uncertain future for Lowe’s and the For 2010, the Consumer Price Index for All Urban Consumers (CPI-U) raised 2.1 % implying low infl Department of Labor: U.S. Bureau of Labor Statistics, 2011). However, strong CPI increases occurred benefit Lowe’s with customers looking to decrease their energy consumption and costs. For 2010, the unemployment rate has risen to 9.6% while the employment-population ratio decreas Bureau of Labor Statistics, 2011).  However, the employment situation has improved for the first qu decreased with March having......

Words: 15721 - Pages: 63

Exploring the Chalenges of Strategic Management Accounting in the Post Global Economic Crisis Era

...STRATEGIC MANAGEMENT ACCOUNTING IN POST GLOBAL ECONOMIC CRISIS ERA IN NIGERIA: IMPLICATIONS FOR THE NIGERIAN PROFESSIONAL BY BENNETT B. BENNETT UNIZIK/ACC/Ph.D./2011387014F DEPARTMENT OF ACCOUNTANCY, FACULTY OF MANAGEMENT SCIENCES, NNAMDI AZIKIWE UNIVERSITY, AWKA SEPTEMBER, 2012 TABLE OF CONTENTS Certification Approval Declaration Acknowledgement List of Tables Abstract CHAPTER ONE INTRODUCTION 1.0 Background to Study 1.1 Statement of Research Problem 1.2 Objective of Study 1.3 Research Question 1.4 Research Hypothesis 1.5 Significance of the Study 1.6 Scope and Delimitation of Study 1.7 Limitations CHAPTER TWO LITERATURE REVIEW 2.1 Historical Background 2.2 Conceptual Frame work 2.3 theoretical Frame work 2.4 Review of Current Literature CHAPTER THREE METHODOLOGY 3.1 Design of the Study 3.2 Data Collection 3.3 Method of Data Analysis CHAPTER FOUR DATA PRESENTATION, ANALYSIS AND INTERPRETATION 5.1 Summary 5.2 Conclusion 5.3 Recommendations 5.4 Suggestions for Further Studies Bibliography Appendix CERTIFICATION This is to certify that this research work was carried out by Bennett, B. Bennett of the Department of Accountancy Nnamdi Azikiwe University, Awka. _______________________ Prof. B.C. Osisioma Date. APROVAL This paper titled “Exploring the Challenges of Strategic Management Accounting in Post Global Economic Crisis Era: Implications for the Nigerian......

Words: 3081 - Pages: 13

The Role of Central Banking in the Global Economic and Financial Crisis

..."The Role of Central Banking in the Global Economic and Financial Crisis" 1. Introduction It is fair to say that central banks around the world have learned the lessons from previous crises and they attempted to change financial regulations to keep pace with the changing global financial system. The policy response triggered by the recent financial crisis has been rapid and it appears that the global policy response has helped to mitigate the effects of the financial crisis. European Central Bank response to the latest crisis was an example of swift and effective reaction. It combined a mix of standard and non-standard monetary actions. 2. European Central Bank (ECB) – history and mission The ECB is the central bank for Europe's single currency (the euro) and its main task is to maintain the euro's purchasing power and thus price stability in the euro area. The ECB was created in 1998 to serve as the central bank representing the interests of the countries belonging to the European Union. In less than a decade, the ECB, headquarter in Frankfurt, Germany, has emerged as one of the world’s most important financial institutions. The Treaty of Nice (1967) established a three-stage plan to create a single currency and monetary policy for the euro area by creating the European System of Central Banks (ESCB). The ESCB consists of the ECB as well as the national central banks for each of the member nations. The ECB is successor of the European Monetary Institute (EMI).......

Words: 2079 - Pages: 9

Global Crisis

...Financial Crisis Will Not Deepen Further Financial crisis occurs when the value of financial institution or asset price drops quickly. (Investopedia US, 2013) Today the world financial system is undergoing economic recession. It is assumed to have begun in the year 2007-2008. After the great depression US economy suffered a short term recession in 2001 but came out with it adequately. It also wide stood dotcom bubble bust, attack by terrorists and accounting scandals. Federal government decreased it rate 11 times from 6.5 in 2000 to 1.7% from the year 2000 in order to increase its liquidity in the economy. A man with no job, no income and no asset was able to afford a house mortgage. This rate was decreased to 1% in June 2003. In 2004 country’s elite banks like Lehman brother, Goldman sacs, Merrill lynch, Morgan & Stanley were relaxed with the net capital requirement 30-40 times. (Sivakumar and Krishnaswami, 2012)But after saturation point problem started rising with the rising interest rates. In 2007 it turned out to be a bad new when federal fund rate reached 5.25% in 2006. Many banks got erupted and with shortage of money. Central banks in several countries like UK, Europe central, Sweden, Canada, Switzerland, china etc help in adding world economy but failed. This economic crisis also exploded the economies of Arab nations, Japan, UK, Ireland, Greece, China etc. The consequences faced by these countries in the meltdown were low GDP, high inflation, low deflation,......

Words: 4318 - Pages: 18

Crisis Economics

...SUBSCRIBE NOW and Get CRISIS AND LEVIATHAN FREE! Subscribe to The Independent Review and receive your FREE copy of the 25th Anniversary Edition of Crisis and Leviathan: Critical Episodes in the Growth of American Government, by Founding Editor Robert Higgs. The Independent Review is the acclaimed, interdisciplinary journal by the Independent Institute, devoted to the study of political economy and the critical analysis of government policy. Provocative, lucid, and engaging, The Independent Review’s thoroughly researched and peer-reviewed articles cover timely issues in economics, law, history, political science, philosophy, sociology and related fields. Undaunted and uncompromising, The Independent Review is the journal that is pioneering future debate! Student? Educator? Journalist? Business or civic leader? Engaged citizen? This journal is for YOU! SEE MORE AT: INDEPENDENT.ORG/TIROFFER SUBSCRIBE to the The Independent Review NOW and q Receive a FREE copy of Crisis and Leviathan OR choose one of the following books: Beyond Politics The Roots of Government Failure By Randy T. Simmons The Challenge of Liberty Classical Liberalism Today Edited by Robert Higgs and Carl Close Lessons from the Poor Triumph of the Entrepreneurial Spirit Edited by Alvaro Vargas Llosa Living Economics Yesterday, Today and Tomorrow By Peter J. Boettke q q q q q YES! Please enroll me with a subscription to The Independent Review for: q Individual Subscription: $28.95 / 1-year (4......

Words: 2612 - Pages: 11

Global Crisis

...How this country was affected by the current global crisis? How is it dealing with the situation? Be sure to address the monetary and fiscal policy of the government and the rescue package (if any) implemented by the government. This paper describes how government of India and RBI (Reserve bank of India, equivalent to Fed Reserve in US) tackled aftermath of global financial crisis in India. Effects of Global crisis Aftermath of Financial crisis was more prominent during 2008. As the global financial crisis began unfolding in the first nine months of 2008, foreign institutional investors pulled out close to $10 billion from India, dragging the capital market down with it. The liquidity crisis, coupled with the credit squeeze and a weak currency, hurt various sectors. Banks have reined in retail financing, affecting home and auto loans. Car loans account for 70% of consumer auto purchases now, down from 85% a year ago. Meanwhile, consumers are deferring other purchases while financiers have been logging a drop in loan disbursal rates At that time the Bombay Stock Exchange Index, or Sensex, tumbled 6% to a two-year low. For the first time in five years, the central bank cut the cash reserve ratio, the amount of funds that banks have to keep with the Reserve Bank of India by 50 basis points, to 8.5%, on Oct. 6, 2008. The same evening, the Securities & Exchange Commission of India eased some restrictions on foreign portfolio investors—such as registering in India......

Words: 1811 - Pages: 8

Economic Crisis

...Root Causes of the 2008-2009 Economic Crisis Pol 201 For this paper I will look into the 2008- 2009 Economic Crisis. There were many factors that contributed to the crisis; I will focus on what may have led to the downturn of the economy and some of the policies implemented by key actors responsible for turning our economy around. I will also look at those who have changed monetary or fiscal policy, and laws governing business since the collapse. I will also give my thoughts on whether these changes will actually be successful on turning things around for the better of our economy. The economic collapse of 2008 has affected so many people across the nation. With the current unemployment rate at 8.2 percent, (less than .5 percent away from where it was the first year of the Great Depression) many people have lost their homes due to not being able to pay high mortgage costs. Everyone knows at least one family who has been affected by the collapse. Some may say it started because of bad mortgage lending, others say it is because people got in to mortgages that were beyond their means. I believe the crisis has to do with everyone involved in the picture; policymakers, lenders/banks, and consumers. I was born and raised in San Diego, California. My Mother and Father brought me up with the idea that owning real estate is always a good investment. At age 20, I had a great job making between 60,000- 80,000 dollars annually and the first thing I did when I......

Words: 2390 - Pages: 10

Economic Crisis

...The WWII was like one of Houdini’s tricks that capitalism has come up with in its history to escape the economic crisis of depression that followed the WWI. Before the war, the policies implemented by Roosevelt were decedent and successful, but the economy was still suffering as the unemployment rate was very high. The war effort was a the main factor behind making a busy economy that lifted the US labor into full employment through the rising output growth resulted by investments and factories which means more income which then re-enters the system and gives an edge in productivity. The key behind this dynamic growth was initially driven by industrial production, then by expending this production for export and that what made the Golden Age of post WWII capitalism between the 1940’s to the 1970’s. To understand what happened during that period, it is important to know that the global economy has created the best conditions for high investment rates and high output rates, which means low unemployment rate and of course low inflation. This climate has helped the profit rate to continue to grow each year. But diving a little bit further, the real cause behind the growing rates was a pattern of technical change which is reflected in an important shift of the cyclical process driven by economic competition in which producers invest more and more in new machinery. That change has helped the labor-productivity to rise at increasing rates while keeping capital productivity at......

Words: 320 - Pages: 2

Economic Crisis

...Economic Crisis Constance Borden Everest University With the booming rate of the economy in the United States was growing consistently from 1990’s until the early part of 2000. Foreign credit was at an increase and home ownership at 70% by 2004. ( The interest rates and lending standards were low making it easier for low-income individuals to buy a house. After the terrorist attack, September 11, 2001 the American people saw a change in the economy took a turn for the worse. Gas prices started to rise, companies began laying off or shutting down, and many people were losing their houses through foreclosures. Clinton’s administration, both Bush’s administrations, Congress, and HUD all pushed to give loans to low-income homebuyers through government sponsored mortgage companies like Fannie Mae and Freddie Mac. Other banks found they could make more mortgage loans with the lowered lending standards, collect fees associated with the companies like Freddie Mac and Fannie Mae and sell the loan to the GSEs without having the risk. (What Caused the Meldown, 2010) September 1, 2001 the also known as 9/11 when terrorist struck the United States which was already on the verge of a ressission. Title of Paper Begin your paper with the introduction. The active voice, rather than passive voice, should be used in your writing. This template is formatted according to APA Style guidelines, with one inch top, bottom, left, and right margins; Times......

Words: 840 - Pages: 4

Global Economic Crisis

...Tutorial 2: What do you understand by the term Global Economic Crisis of 2008? Identify and explain some of the causes. Global Economic Crisis of 2008 was known as the biggest financial crisis after the Great Depression of 1930s. In September 2008, one of the most venerable and biggest investment bank, Lehman Brothers was forced to declare itself bankrupt, and the world’s largest insurance company, AIG collapsed. The financial collapses of these companies triggered the global economic crisis, with Asian stocks slammed by; stocks fell off a cliff and became the largest single point drop in history. These tragedies crushed the world’s economy and result in global recession. It costs the world tens of trillions of dollars, rendered 30 million people unemployed and doubled the national debt of the United States (Inside Job 2010). The effect of the crisis is the bursting of United States housing bubble in 2004 and it caused the values of securities tied to U.S. real estate pricing to fall dramatically. The complex interplay of policies encourages home ownership, thus; people in the United States had easier access to mortgages loans. As the availability of credit is higher, more residents in the United States began to “own properties” by borrowing money from the banks. Due to the housing and credit booms, financial agreements- mortgage-backed securities (MBS) and collateralized debt obligations (CDO), which gained their value from mortgage payments and housing prices,......

Words: 1479 - Pages: 6

Impact of the Global Economic and Financial Crisis over the Automotive Industry in Developing Countries

...R e se a rc h a n d Stat i s t i c s B r a n c h working paper 16/2009 Impact of the Global Economic and Financial Crisis over the Automotive Industry in Developing Countries UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION RESEARCH AND STATISTICS BRANCH WORKING PAPER 16/2009 Impact of the Global Economic and Financial Crisis over the Automotive Industry in Developing Countries Peter Wad Copenhagen Business School UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION Vienna, 2010 This paper was prepared by Peter Wad, UNIDO consultant and backstopped by Nobuya Haraguchi, UNIDO staff member, Research and Statistics Branch, Programme Coordination and Field Operations Division. Iguaraya Saavedra provided administrative support. The designations employed, descriptions and classifications of countries, and the presentation of the material in this report do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations Industrial Development Organization (UNIDO) concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries, or its economic system or degree of development. The views expressed in this paper do not necessarily reflect the views of the Secretariat of the UNIDO. The responsibility for opinions expressed rests solely with the authors, and publication does not constitute an endorsement by UNIDO. Although great care has...

Words: 19863 - Pages: 80

Global Crisis

...liquidity. Though Fed and other central banks pumped billions into the banks, the market looked risk averse. US spent $700 billion in an effort to save the financial sector from the systemic risk. Wrong banking practices, Blinding greed resulted into an imminent recession for US economy , but worse, transcended the effects to the rest of the world. The liquidity crisis finally converted to a solvency crisis resulted into crisis of confidence. The recovery from the crisis doesn’t seem to be a robust one. With 9% unemployment and a projected GDP of 2% US economy can’t paint an optimistic picture. Financial instability has social implications as well. Current agitation against bankers is an indication of loss of credibility and will have future political implications too. Crony capitalism and excessive greed has given the world one of the worst crises in centuries. Euro zone crisis: First Ireland and now Greece; Euro zone’s trouble have no end. Developed economies running as welfare states in dearth of young population along with rapid credit growths and stretched leverage positions have given rise to another crisis on the other side of Atlantic. Greece is insolvent and Italy and Portugal can be next in the row. IMF’s report on financial stability says that only 8 banks in Euro region are below the capital requirement. Today banks are better structured and in the better position than in 2007. The banks are facing lack of liquidity and not of capital. But the problem of......

Words: 1013 - Pages: 5

The Impact of the Global Economic Crisis on the World Economic Order

...The Impact of the Global Economic Crisis on the Arab World The Arab countries had experienced rapid changes in their economic fortunes in the year 2008. During the first half of 2008, oil, natural gas, and other commodity prices continued to rise rapidly, leading to huge gains. At the same time, they had to cope with rapidly rising food and raw material prices that threatened their economies and social stability. By July, the effects of the financial crisis and expectations of much lower global growth caused a collapse in oil prices. As a result, Arab oil exporters experienced a fall in hydrocarbon receipts, deterioration in their terms of trade, and declining surpluses on their balance of payments. Between July and December, the Organization of the Petroleum Exporting Countries (OPEC) basket price of oil fell by 70 percent from a peak of just over $130 per barrel to under $40 per barrel. In September 2008, with the collapse of Lehman Brothers and the turmoil on Wall Street, stock markets all over the world fell, including those in the Middle East. Arab banks were not overly exposed to the U.S. mortgage or derivatives markets, but sovereign wealth funds and other holders of equities suffered large losses. The stock markets in the region suffered along with others around the world. In the twelve-month period ending in February 2009, the Saudi stock market fell by 49 percent, Dubai's by 72 percent, and Egypt's by 61 percent. These losses have reduced consumption and......

Words: 751 - Pages: 4

Chiffon Dresses | The Watcher Self | Story of Yanxi Palace (Cantonese) - 延禧攻略Story of Yanxi Palace (Cantonese)