Contact Us
Sign In / Sign Up for FREE
Go to advanced search...

The Current U.S. Economic Crisis and Potential Fixes - Essay Example

Comments (0) Cite this document
This paper carries out an analysis of how and why the crisis occurs and it evaluates the effectiveness of current measures used by the government to solve this crisis. Major Banks in the United States and Europe have recently suffered significant losses as a result of the recent credit crisis. …
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER99% of users find it useful
The Current U.S. Economic Crisis and Potential Fixes
Read TextPreview

Extract of sample "The Current U.S. Economic Crisis and Potential Fixes"

Download file to see previous pages The outbreak of the recent sub-prime crises came after warning signals of write-downs in the value of mortgages late last year6. House prices in the U.S witnessed an unusual growth between 1997 and 2005. For example, prices increased by approximately 85% during this period. The period 2001 and 2005 witnessed the highest rates of appreciation7. Sub-prime delinquencies and foreclosures were therefore mitigated by house price appreciations during these years. This is so because borrowers facing difficulties to make regular mortgage payments could depend on the appreciation of the value of their property to solve their financial problems by refinancing the mortgage and withdrawing cash from the increased equity in the house thereby sustaining the new mortgage for a while. Borrowers could repay the principal by selling off the property8. Appreciation in property prices therefore significantly improved the performance of sub-prime loans9.
However, Ellis (2007) argues that house prices began to decline in 2006, and as at October 2007, prices were down by approximately 3.2% of their peak in the second quarter of 2006. Banks and financial institutions were expected to face an uphill earnings battle early this year. "certainly, we will not be at the levels of profits we saw within the last 12 months". This is a quote by Mark Batty, a financial services analyst at PNC wealth Management Philadelphia, which manages about $77billion of assets10. According Ellis (2007) investment banks and brokerages in the S&P 500 such as Goladman Sach a member of the Fortune 500 and Merrill Lynch a fortune 500 member as well were expecting to experience a 10% decrease in earnings growth in the fourth quarter of 2006. Diversified Financial firms like Citigroup...
From the report it is clear that sub-prime delinquencies and foreclosures were therefore mitigated by house price appreciations during these years. This is so because borrowers facing difficulties to make regular mortgage payments could depend on the appreciation of the value of their property to solve their financial problems by refinancing the mortgage and withdrawing cash from the increased equity in the house thereby sustaining the new mortgage for a while. Borrowers could repay the principal by selling off the property.
This essay stresses that banks are currently facing declining demand for mortgages and home equity loans as well as rising illiquidity and foreclosures among home owners. Bank of America recently announced its intention to get out of the wholesale mortgage market and it is planning to retrench 700 workers following a huge drop in earnings. The demand for asset-backed loans such as commercial paper has witnessed a drop. Financial services firms depended a lot on real estates as a means of backing their loans to debtors. Companies and financial institutions rely on these loans to raise short-term loans and a fall in demand implies that earnings to financial institutions will remain under pressure. The evidence suggests a significant relationship between “policy-induced” driving up of U.S silver and Chinese exchange rate appreciation and price deflation. The reversal of the silver flow into Shangai led to a credit crunch in the city.

...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
(“The Current U.S. Economic Crisis and Potential Fixes Essay”, n.d.)
The Current U.S. Economic Crisis and Potential Fixes Essay. Retrieved from
(The Current U.S. Economic Crisis and Potential Fixes Essay)
The Current U.S. Economic Crisis and Potential Fixes Essay.
“The Current U.S. Economic Crisis and Potential Fixes Essay”, n.d.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF The Current U.S. Economic Crisis and Potential Fixes

CLS v. Martinez, 561 U. S

...?A LEGAL BRIEF ON THE RECENT U.S. SUPREME COURT RULING IN CLS V. MARTINEZ, 561 U. S. On June 28, the United s Supreme Court gave a ruling on the CLS vs. Martinez, 561 US ___130 S.Ct. 2971, 177 L.Ed.2d 838 (2010). The case was filed by the Christian Legal Society (CLS) at the Hastings College of Law at University of California on the ground that official governing groups should accept all the students regardless of their beliefs and status to acquire recognition. The respondents were Leo Martinez, Acting Chancellor and Dean of Hastings College of Law, University of California; Jacqueline Ortega, Student Services Director; the Board of Directors of Hastings College of Law, University California: Donald Bradley, Tina Combs, Maureen Corcoran...
3 Pages(750 words)Coursework

The current Global Economic Crisis and Globalization

...? The current global economic crisis and globalization Globalization According to Faundez p. 28), globalization is defined as the process through which the interdependence and connectivity of the world’s businesses and markets is increased. Globalization has accelerated dramatically in the past two decades following the technological advances, which have made it easier for the people to communicate, travel, and carry out business internationally. The two major recent forces, which have actually driven and accelerated globalization, are the rise and expansion of the internet connectivity and the improvement in telecommunication channels. Generally, as connection between economies is strengthened, the consequences are always an increased...
14 Pages(3500 words)Essay

What Caused the Current Economic Crisis

...?What caused the current economic crisis? The whole world was taken aback as the slow and destructive financial turmoil unfolded in various parts of the world in late 2007. The credit crunch initiated a long chain of inter-connected events that threatened the existence of financial markets all around the globe. This meant the very foundations on which our principles and understanding of the whole economic system was based on were shaken and jolted to an extent that people lost confidence in its integrity. It raised questions that directly pointed fingers on the functioning of the global financial markets. The whole crisis began when the US investors lost confidence in the value of sub-prime mortgages resulting in an adverse liquidity...
5 Pages(1250 words)Term Paper

Analysis the Current Economic Crisis

...Topic: How the current economic crisis is more like the economic upheavals of the late 19th century industrial revolution, rather than the great depression. The Civil war and the period of Reconstruction was arguably the most turbulent period and triggered a number of changes that conclusively shaped the American society. Symbols of uncertainty like slavery, national supremacy and national supremacy were demolished and a period of uncertainty and chaos that had gripped USA for more than 80 years was decisively put to rest. (Introduction, n.d.) However, the end of the civil war did not result in a stable society. As a matter of fact, it marked the initiation of a new kind of change in the society. However, this change was caused...
4 Pages(1000 words)Term Paper

The Current Economic Crisis in Australia

...the current economic crisis in australia Introduction The slowing of economic growth and turmoil in the financial markets has filled headlines in both advance and developing countries. Yearend of 2008, the leading indices in France, Germany, Britain, US and Australia each fell about 40% and the International Monetary Fund (BBC News, 2008) predicted that by 2009, advance economies will contract by .3%. Australia's economy all of a sudden shrank (Business Times, 2009) for the first time in eight (8) years final quarter as chastened consumers selected to save rather than spend. This paper highlights the key reasons for the current economic crisis in Australia and discusses the likely effects to the country. Australia on Brink...
4 Pages(1000 words)Essay

The current U.S. economic crisis and potential fixes

... Supervisor How/Why did the current financial crisis developed, what steps have been taken to fix it (have they been effective and other potential fixes the U.S. government should explore to fix this crisis.  By: April, 2009 TABLE OF CONTENTS 1.0Introduction 1.1How Did the Current Financial Crisis Developed? 1.2 Why did the Current Financial Crisis Developed 2.0 Current Solutions to fix the Current Financial Crisis 3.0 Conclusion Recommendation and the Way Forward 1.0Introduction Major Banks in the United States and Europe have recently suffered significant losses as a result of the recent credit crisis. This calls into question the adequacy of baking regulation both at the national and international scene1. For example, Northern...
10 Pages(2500 words)Essay

U. S. Constitution

...US Constitution s right in American political system refers to the political rights reserved for the governments. Even though America asa whole has a federal government, each state in America has separate state governments. US constitution provides some specific rights to the state governments in law making even though all the state governments are operating under the federal government. The rights of the state government are protected by the tenth amendments (Part of bill of rights) in US constitution. According to The Tenth Amendment to the U.S. Constitution; “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States, respectively, or to the people” (Tenth Amendment...
1 Pages(250 words)Essay

The U>S Legal System

... Legal Issue and a Strong and Substantiate Argument in Support of Your Opinion Task The case is centered on two counts: counts of murder and burglary. On the count of murder, the defendant is accused of the first degree murder. First-degree murder, in most states, is an illegal killing that is both premeditated and willful, meaning that it was committed after "lying in wait" or planning for the victim. In this case, the deceased had earlier wanted to dispose of some of her diamond rings, though not clear. The defendant may have been involved in the deal and latter planned to kill her for the rings. That again introduces another crime committed – burglary. Based on the evidence provided, the defendant broke into Stella Blauvelt’s... Legal...
1 Pages(250 words)Assignment

U S History

... "Crisis of Confidence" in the United s The United s was a dominant world power in the 1970’s even though the countries self-perception was mired in doubt and malaise. The stagflation of the country’s economy, the experience and results of the Vietnam war, the lack of confidence of the government by the people as it was no longer perceived as a champion of freedom, the Watergate imbroglio all contributed to the “crises of confidence” in the country. The debt on the dependency of US citizens and the government increased resulting to difficult times. Jimmy Carter came into power at the time after the country’s failure in the Vietnam and Watergate scandals. A leadership crisis emerged that was characterized by deep and widespread lack...
2 Pages(500 words)Admission/Application Essay

The Economic Impact of the Emergence of China and India

The main macroeconomic variable that toys in the global economy’s shift are the emergence of India and China as new superpowers. This emergence certainly has a number of implications, but among the most relevant are: disruption of the equilibrium of the global economy which results in rising demand of goods, giving way to worldwide inflation; the attractiveness of outsourcing to these countries due to low cost but high talent workforce of these countries for cheaper operations.
The growing middle class of China and India results in booming demand for the automobile industry. This increase in demand, with the increasing purchasing power of these countries’ people, is not limited to automobiles but more apparent in...
10 Pages(2500 words)Assignment

Potential Benefits of International Trade

Conditions set for international trade have also changed in various nations. Today, interdependent is evident due to various global distributions. Examples are; transportation systems, the internet as well as satellite communication systems.
The establishment of WTO (World Trade Organisation) promoting equity in nations’ status, the international monetary Fund (IMF) besides the World Bank, has made stronger the anchorage of international trade. These organisations aid in reducing the trade barriers across boundaries. Nelson (2000). This is a study set out to make a comprehensive and vivid answer to the question, “Which are the benefits of international trade and why are trade restrictions imposed by countries?&rdq...
6 Pages(1500 words)Coursework

Potential Proprietary Interests and Repair Obligations

Whether the interests constitute occupational leases ultimately depends on whether the arrangements constituted a contractual arrangement under a licence, or alternatively granted proprietary rights under a lease. I shall first consider the general legal principles pertaining to the distinction between a lease and a licence and apply to the factual scenario to determine the interests of the three parties currently in occupation.

With regard to whether or not the living arrangements constitute a lease or a licence, the general principle of law is that unless an individual occupying another’s land has exclusive possession, they will be a licensee and not a tenant3. Accordingly, if the parties do not have exclusive p...
6 Pages(1500 words)Essay

Economic Analysis of India

The country’s economy is fast growing with a stable political system that encourages foreign investment although with certain restrictions. The country generally has good energy, transport and communication systems which make the cost of doing business affordably.

The Republic of India found South of Asia is by far the world’s most populous democracy and ranks seventh largest in terms of geographical area (Brown, 1994). India is also the second most highly populated country in the world. The country has a rich culture with four major religions having originally emerged from it; Sikhism, Buddhism, Hinduism, and Jainism. The Indian Republic consists of seven union territories and 28 states and ranks twelfth la...
8 Pages(2000 words)Case Study

Bernard Madoff : A Scapegoat of the Economic Crisis

Darwin was condemned and treated with contempt by the Church for proposing the theory of evolution that linked all living matter in the earth, including humans. In the case of Bertrand Russell, he was imprisoned as a conscientious objector, for expressing his opposition to British participation in the First World War. These are typical examples of people being wrongfully punished when they were guilty of no crime or fraud or misdoing. It would be highly improper to associate Bernard Madoff with the aforementioned luminaries, for he was truly guilty of carrying out the biggest financial fraud in modern history. At the same time, it would be simplistic to classify him as a victim of the contemporary judicial system. The truth, in fa...
6 Pages(1500 words)Assignment

Economic Models: The Free Market and The State Owned System

The free market concept is mainly a theoretical concept as every country, even capitalist ones place some restrictions on the ownership and exchange of commodities (Free market economy). Therefore, the term free-market economy primarily means a system where the buyers and sellers are solely responsible for the choices they make. It gives the buyers and sellers the power to do business without being afraid of any regulations and intervention by the state. Hence, a free market gives the absolute power to prices to determine the allocation and distribution of goods and services (Free Market Economy). The pricing mechanism is in turn, driven by the forces of demand and supply of goods and services. Demand and supply of...
9 Pages(2250 words)Case Study

Economic Analysis on BMW Cars in the US Car Industry

Mini and the 1-series rapidly grew at a much higher rate through 2008. Since the early days of the new millennium, BMW has been one of the first automakers to utilize flexible factories in which more than one vehicle model could be produced at the same time. This enabled the company to meet shifts in market demand more effectively than BMW’s competitors could. BMW challenges to retain its market position in the international market for luxury cars. Many automakers, such as Hyundai with its Genesis sedan or Nissan's Infiniti brand are increasingly successful in realizing higher margins earned on luxury vehicles. BMW is rated behind luxury brands such as Lexus, Porsche, Mercedes, and Infiniti for these reasons

1. Th...
7 Pages(1750 words)Case Study

Approach to Education: Comparison of Philosophies of A S Neill & Paul Hirst

He believed that to impose anything by authority is wrong. The child should not do anything until he comes to an opinion – his own opinion- that it should be done. He states clearly his commitment to freedom of a child: ‘we set out to make a school in which we should allow children to be themselves. In order to do this, we had to renounce all discipline, all directions, all suggestions, all moral training, and all religious instruction. The child should never be forced to learn, Attendance at lessons should be voluntary whatever the age of the child. Only learning that is voluntarily undertaken has any value, and children will know themselves when they are ready to learn. (Summerhill , p.37)

Children will on...
9 Pages(2250 words)Report

Globalization and World Economic Forum at Davos 2010

The seven forces of globalization are; Markets, Production, Culture, Labor, Technology, Environment, and Liberalization. Of these factors, the globalization of markets has engaged substantial attention of the firms and academia. Some markets are highly globalized, while some are not. The scale of market globalization is determined by the extent of globalization of customers, customer needs, distribution channels and marketing strategies of the players in the industry (Stonehouse et al, 2004).

The phenomenon of globalization of markets has resulted in both advantages and disadvantages. It has resulted in the convergence in the requirement of features in a product and augmentation of the intensity of B2B and B2C communica...
7 Pages(1750 words)Coursework

The 1846 Invasion into Mexico by the U. S.: The Political and Economic Forces that Brought about the Invasion

Some of the territories led to a war with Mexico from which the United States emerged victorious, expanding its territories and decisively establishing its dominance in North America.

President Andrew Jackson led an example of an administration that set the stage for the way in which James Polk would lead. In 1817, as a still yet military leader, Jackson led the United States into the first of three conflicts with the Seminole Indians from which the acquisition of Florida from Spain would be negotiated and finalized. The situation with Spain was tenuous and should have been dealt with in a diplomatic and cautious manner, but in 1817 President Monroe wrote a letter to General Jackson stating that “Great interests...
8 Pages(2000 words)Article
sponsored ads
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.

Let us find you another Essay on topic The Current U.S. Economic Crisis and Potential Fixes for FREE!

Contact Us