The effects of credit crunch were considerably destructive for the financial institutions. Most of the investment banks were suffered a lot. They had no choice either to reduce the value of their assets or to file for bankruptcy…
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The effects of credit crunch were considerably destructive for the financial institutions. Most of the investment banks were suffered a lot. They had no choice either to reduce the value of their assets or to file for bankruptcy. For many investment banks, even the value reduction of assets did not prove to be sufficient enough to protect them for the severity of the global financial crunch. It looked as the investment banks were struggling to fight for their existence; they were trying to stay alive and remain a part of the financial world. But, for many banks, their lives saving attempts were insufficient to protect them from the effects of the credit crunch. As a result, many investment banks had no choice left in the period of 2007 to the year of 2009; willingly or unwillingly, many declared their bankruptcy. In the initial face of the credit crunch, the financial and investment banks faced the harshness and severity of the financial crisis, the entire situation was so disappointing that many disappeared from the international financial circle and mergers, acquisitions, liquidations, bankruptcies and nationalization were the only options left for them (The WTO Doha Round and Regionalism, 2009). ‘Recession is when your neighbour loses his job; depression is when you lose yours’ (Ronald Reagan (1980) as saying, quoted by Eslake, 2008). Interestingly, there is no official or generally accepted criterion to identify a difference between a ‘recession’ and a ‘depression’. ...
On the face of it, the period of recession is comparatively less than the period of depression. For instance, some economists are of the view that the recession may occur and last for two to three quarters. And its impacts could be limited to some particular sectors of an economy. As a result, recession could put negative impact on the index of employment and may trigger some sort of unemployment in some specific economic sectors of the economy. On the other hand, the period of depression tends to be larger and wide spread. The Great Depression of 1929 did not continue for one or two years; rather it constantly showed its pressure on the economy throughout the decade on the 1930s. Additionally, depression tends to be wide spread in an economy. It almost hit negatively to each economic sector of an economy. Causes of the Great Depression The decade of 1920s considerably experienced consumers taking on more debt in America. In this period of decade, according to Bernanke (1983) the outstanding amount of real estate mortgages sharply increased from the level of $11 billion to the level of $27 billion. The debt instalment also saw a sharp increase due to a wide spread availability of consumer goods. Due to the facility of credit and other forms of debt, many consumers facilitated their needs by increasing their purchases of household appliances, cars, homes and other basic necessities that they liked (Parker, 2007). This cause came from the consumer side that were mostly showing their consumer confidence on the economy of the America. On the other hand, the stock market was touching new psychological heights. And on each passing day, the stock market had something more than the previous day
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Federal Reserve Actions during the Great Depression in 1929 and 1930, and the Global Economic Recession of 2008 and 2009 Introduction The global economy has changed in various periods in history. Changes in global economy are interesting since they affect different continents in the world.
Banks and investors become wary of providing funds to financial institutions thereby forcefully increasing the cost related to debt products for borrowers. This also affects for individual borrowers as banks become more risk averse towards their loan portfolio.
This article mainly highlights the impact of the recent recession of 2008 on Unites States economy. The other part of this article highlights the key measures taken by the US government officials in order to rehabilitate the economy once again (2008 Financial Crisis & Global Recession, n.d.).
The study further gives examples of how individuals can take precautions to protect themselves in case of recession or depression.The effect of depression and recession on supply and demand of products is also explained in the study. Recession This is a term that is used in economics to mean a decline in economic activities.
The great depression and the last recession of 2008-2009 are different in terms of their lasting periods, causes, and effects on employment and world trade. Lasting period: The great depression is one great economic disaster that ever happened in history, making it greater than the recession in the modern times.
The measure of trend of these periodic fluctuations is measured in terms of the levels of employment and production. When the measure indicates a down trend, then it is referred to as recession. This downward trend causes a decline in the spending of households.
The author states that the period of the Great Recession is very different in how the United States Government dealt with it. While the government took some time to come to the realization that there was a contraction of above-normal proportions in the economy, they responded as soon as they became aware.
Therefore, it is relevant to talk about the reasons that triggered the Great Depression as well as the Great Recession. The root of evil can be found for both periods of economy in debts of investors. Too many loans led to the decrease in their payments. Both, periods of
In addition, the former claim that only developing nations suffer from economic crises has proven false in the face of actual events. Therefore, it is integral to realize, that no economic model can so far
The breadth and depth of the both crises and in particular the suffering that resulted from the great depression is legendary. The global financial crises that lead to recession in 2007 had been predicted to
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