We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Effects of Financial Panics on Economy - Essay Example

The statement by Bernanke talks about financial crisis in the market and the prospective causes (Bernanke 1). The statement prospects that the financial crisis resulted from significant losses from residential mortgage loans given to subprime borrowers. The potential for losses are large especially with outstanding funds in the subprime mortgages (Bernanke 2). However, apart from mortgage loans, lack of government’s crisis-response plans can result to severe financial crises, which adversely affect the broader economy. When banks run short of funds, depositors in the bank, and lenders in the commercial market, place the highest value on safety and liquidity (Bernanke, 2). According to Gary Gorton, when banks find funding costly and difficult, investors pull back funding and affect the country’s economy. For example, a medium-sized German bank announced to receive extraordinary support from the government and German banks association to meet its obligations. This resulted from inability of its Rhineland off-balance sheet to roll over the asset-backed commercial paper it issued in U.S market to fund its asset-backed securities (Bernanke 2). Commercial paper investors became concerned about the bank’s ability to meet its obligation and withdrew their investments. The financial panics the investors experience makes them withdraw their investments from the bank, affecting the economy. Shortfalls in the private sector amplify effects of financial panics on the economy. Bernanke’s

Check these samples - they also fit your topic

The Financial Crisis and its effects on the world economy
The financial crisis of 2007-08, not only led to the collapse of several banks and financial institutions, but turned down the stock markets in most of the countries. There are several specific reasons for the financial crisis which is discussed below in detail.
11 pages (2750 words)Essay
The Effects of Prison Economy
Perpetuators of justice have rationalized alternative options to reach an equitable agreement among parties involved in sentencing decisions. The current study aims to seek effective and appropriate responses to the research question, to wit: What effect does the Courtroom Workgroup have on criminal justice outcomes?
10 pages (2500 words)Research Paper
The effects of the 2008 Global Financial Crisis on the Thai Economy
2008 is a very tough year for Thailand. The country is within its internal political crisis during this year that deepens the manifestation of social divisions and being to be affected by the most serious global financial crisis that has to face and resolve (Singh 2009 p.334).
9 pages (2250 words)Essay
Globalization: Effects on Economy, Immigration, and Technology
Globalization refers to the process through which national economies and cultures are integrated into an international economy so as to enhance international trade, direct foreign investment, migration, and technology sharing.
6 pages (1500 words)Essay
Finance Effects Economy
The unemployment in the United States on September 2011 was 9.1% (Bls). The best strategy for a student in a tough job market is to pursue college degrees that have a high demand in the marketplace. A college major that has a great demand is finance. Finance can be defined as a disciplined concerned with determining the value decisions; its functions include allocation of resources including acquiring, managing, and investment of limited resources (Thefreedictionary).
4 pages (1000 words)Essay
Financial Crisis Effects on America
According to the report the crisis is traceable back from a flaw that occurred in the sub-prime part of the housing economy of the United States and spread over a considerable portion of the economy by the end of 2007. The US economy’s challenge had a wide range of implications on other countries’ economic situations, including Japan and others in the EU.
6 pages (1500 words)Essay
Effects of Taxation on Economy
By the means of taxation, the government acquires purchasing power from the people and then uses the funds so raised in productive investment, which is essential for rapid economic growth. (b) A tax on sale of a particular commodity or general sales tax; and (c) import and export of commodity known as customs duty.
3 pages (750 words)Essay
Financial effects and constraint paper
It serves almost all fields of health care ranging from direct patient care and guidance to pharmaceutical research. All in all it seeks to promote the well-being of their patients. Considering pharmacy in this context, it has substantial effects on the
3 pages (750 words)Essay
Stereotypes, Cyborg & Moral Panics
Violent ? Maybe not is one is in real war. The scenes described above illustrates the first mission in Call of Duty , the game developed by Infinity Ward
8 pages (2000 words)Essay
Reporting Panics
By putting the pieces of information they find from these different places together, the world receives the news it requires in a day. Today, there are several factors that have made the work of journalists even more advanced, making it possible for them to execute their
14 pages (3500 words)Essay
article concludes that they amplified the causes of the crisis, posing threat to financial and economic stability (Bernanke, 12). Lack of timely and effective government action affects the possibility to contain the severity of financial disruptions and their economic effects (Bernanke 18). The government’s panic of losing finances of the too-big-to-fail firms calls for its support to prevent the firm from going into liquidation. This is because its liquidation largely affects the entire economy (Bernanke 20). Christina’s article talks of Depression in the United States. The main topics include the causes, the start, the worsening, and the end of the Depression. The topics are of importance because they help to study the market Depression in America effectively.


The following essay gives a detailed information about how economics can change due to financial panics which can result from an expected financial crisis that markets foresee in the future depending on monetary policies existing in the market before a crisis appears…
Effects of Financial Panics on Economy
Read TextPreview
Comments (0)
Click to create a comment or rate a document
Let us find you another Essay on topic Effects of Financial Panics on Economy for FREE!
Contact us:
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us