The sequence of events building up to the global financial crisis can be traced from 2001-2008. It started with a financial innovation in 2001 which was followed by the imposition of other financial innovations. The gradually led to the building up of the housing and credit bubble which ultimately burst in 2008…
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The Global financial Crisis first began in USA’s sub-prime mortgage market and this gradually resulted in a global economic recession of a huge magnitude. In this mortgage market, the financial institutions issued sub-prime mortgage loans to householders. In most cases, these borrowers had unstable incomes and failed to fulfill the basic criteria of credit worthiness.
The borrowers mostly kept their respective properties as mortgage and the loans were issued to them against the value of this collateral security. During that time, there was an upswing in the property market and the financial institutions could easily realize the value of this collateral asset by a forced sale. Therefore, the lenders considered the property market a safe place and did not hesitate to issue loans against the property assets kept as collateral security.
A regime of low interest rate was prevalent at that time and the mortgage loans were issued at this floating interest rate. As a result, the borrowers had to repay a small amount of the loan every month. However, the U.S Federal Reserve Bank increased the lending rate of interest in the country. During 2004-2006, the lending interest rate in USA’s housing market recorded a sharp rise. Following this, the borrowing householders had to repay a higher installment of the loan to the financial institutions each month....
They tried to improve their financial situation in this way.2
In the property market, the supply of property exceeded the demand by a large amount, resulting in a huge decrease in the prices of the properties. Now, there were institutions in Europe, Asia and even Africa who had invested in the U.S market. The property assets which were given as collateral security in exchange of the loans issued in the USA were held by these institutional investors across the world. This was made possible by a complicated method of securitization resting on strategies of globalization. Thus, the repayments of the loans made by monthly installments by the borrowers were actually delivered to these institutional investors around the globe. Once the borrowers started defaulting, the monthly repayment of the loans stopped reaching the institutional investors. This resulted in huge losses for the institutions. Banks in the U.S.A and Europe defaulted; various stock indexes declined considerably, the market value of equities and commodities plummeted and there were large scale job losses resulting in unemployment in the economy. This financial crisis continued to spread to several countries of the world.3 4
The global financial crisis of 2008 had four features that were common with the other crises of the world: the increase in the assets prices that did not prove to be sustainable, upsurges in credit that resulted in increasing of debt burdens, the accumulation of marginal loans and the build up of systemic risk and the failure of regulation to control the crisis. It was seen that in the crisis, the regulatory regime had proved to be insufficient. In the developed countries, finance companies,
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In the paper, the regulatory failures that especially the western industrialised countries faced and which led to the universal economic crisis in the year 2008-09, is examined along with the findings about the causes or roots of the arising financial crisis along with certain immediate tasks that should be followed in order to cope up with the financial crisis has also been discussed.
The main issues in this case revolve around the theme of leadership and management with the recently retired CEO, Mr. Ferdinand Piech being the central focus of attention. Organizational growth and development comes out very strongly in this case with leadership playing a key part.
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Some parts of the world were hit more than others. This resulted in worker migration among other consequences such as: the financial losses estimated in billions, large companies achieving resounding fails, increased government debt and rising unemployment, and a significant decline in economic activity (Morris 2008, p.
It is actually a theoretical consolidation of the various past researches on the concerned topic. It is singular and narrative in nature, which would be explaining the domain of the research topic. The literature review in the research paper would theoretically analyze the impact of global financial crisis in the labourer’s migration (Kumar, 2005).
Findings 33 3.5.1 Time series properties 34 184.108.40.206 Unit Root Test 34 220.127.116.11 Cointegration Test 35 3.5.2 Saving Growth Causality 36 3.6 Concluding Remarks 38 Chapter IV: Volatility of Investment 40 4.1 Introduction 40 4.2 Theories of Investment 40 4.2.1 The Simple Accelerator Model 41 4.2.2 The Flexible Accelerator Model 42 4.2.3 The User Cost of Capital 43 4.2.4 The q Theory of Investment 46 4.2.5 Recent Theories of Investment 47 4.3 Proposed Investment Model 48 4.4 Findings 51 4.5 Conclusion 54 Chapter V: Findings, Policy Implications and Conclusions 55 5.1 Summary of Findings 55 5.2 The IMF and the Crisis in the Light of this Study 57 5.3 Policy Implications 59 5.4 Conclusions and Topics
Multiple banks & financial Institutions across the world gradually increased the exposure of their investment capital to the credit & liquidity risks to earn higher returns without realising that the new mechanism of "Securitization" has created high correlations between credit & liquidity risks to market risks which the current risk management system is not capable enough to quantify correctly.
“A collapse of the US sub-prime mortgage market and the reversal of the housing boom in other industrialized economies have had a ripple effect around the world”, asserts Shah (2010). Following this, there
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