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The US/World Economic Collapse. Mainly What caused the crash of 2008 - Research Paper Example

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Client’s Name: Course: 9 May 2012 Global recession has been triggered off across the globe by the sub prime crisis in the US, the crisis has not only affected the US economy but it has also affected almost all the countries across the globe. The crisis has certainly given rise to the possibility of systemic financial crisis, which means that the credit crunch and the liquidity is only going to get worse from here on in…
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Download file to see previous pages The sale of new homes has fallen by almost 50% in the US and people have stopped purchasing new homes in the US because of the housing crisis in the country. “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 have collapsed or been bought out, and governments in even the wealthiest nations have had to come up with rescue packages to bail out their financial systems.” (Global Financial Crisis) Almost the whole world started living on a shoestring, deep pockets were reduced to mere pockets and lucre had certainly fallen short. Countless people got their pink slip while some other got their walking papers. These were some of the impacts of the recent economic crisis. This paper will compressively throw light upon the roots and causes of the economic crisis. AIG, Lehmann Brothers, Northern Rock, Goldman Sachs are some elite names that suffered the most because of the economic crisis also known as recession. Lehmann brothers filed for bankruptcy while AIG and a few other elites just hanged in there with the skin of their teeth. This economic crisis is still having repercussions on countries like Greece and Spain; there are a few other countries that have been not so severely affected by the same. The crisis triggered off because of unchecked debt, banks kept issuing loans to people who invested heavily in buying assets, several things were taken for granted but when proved otherwise there was hardly a place in the world to hide. “The facts are that approximately 6% of all mortgage loans in United States are in default.  Historically, defaults were less than one-third of that, i.e., from 0.25% to 2%.” (The Cause of the 2008 Financial Crisis) The subprime crisis triggered off because of excessive borrowing, there was no money to pay back and this is why so many financial institutes went flat broke. To conclude it is fair to say that the US never kept a watch on the lending, as an inevitable result of which equity in the country fell short this is exactly what triggered off the financial crisis. “While the world has not recovered from the second financial crisis since 2008, Kaushik Basu, the chief economic advisor to the prime minister, anticipates another tanking of global economy in 2014.” (Governance Now) Root Cause and Lessons Learned The Great economic depression triggered off in the year 1930 in the US, it was triggered off by the collapse of the US stock market which is now known as Nasdaq. It was the worst period of the US history, people slept on Hoover blankets and had no money to spend. The economy of the US recovered from this setback only to suffer from a similar setback of a lesser magnitude which is called recession. This paper will comprehensively throw light upon the roots and causes of the current economic crisis. All the major cause will be expansively presented in this paper. “While billions of dollars are being channelled into the financial system to prop it up, the Congress-led coalition government has no plans to alleviate the suffering of the urban and rural poor.” (International Financial Crisis) Overvaluation in real estate is perhaps the ...Download file to see next pages Read More
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