Are Financial Collapses Likely to Occur - Assignment Example

In the event of a financial collapse, it is seen that international trade will take a nose dive majorly because some of the large financial movers in the world are depended upon by other smaller countries. At the same time, housing will stop thriving. The boom that is there for real property will go down majorly because interest rates will affect the desire for the property as they will prove to be out of reach. The prices of goods are also seen to take a low turn as it is rather evident that people will not need them. The financial stocks will be a clear representation of this. The dollar, the world’s most relied-on currency will also weaken other currencies and in the course of this cause the prices of other goods to drop.

Previous experiences and events can also go a long way in shaping the financial decisions that can be made. The way a particular country behaves in the international scene when it comes to the financial scene can go a long way in establishing the predictability of the global financial situation if not the local one. Take the case of the United States for example. It is seen that the country accounts for nearly 25 percent of the total global GDP. When a country of such significant influence in the world gets shaken in its economy then this would prove to be an indicator of the ensuing financial condition.

What ought to be done in this case is that investors should be very much wary of the giant financial controllers of the world say China and the United States. In this same connection also the Central Banks of the various countries that are there may play a rather significant role in the aversion of the effects of the global financial problems through the slashing of interest rates but the effect of this is not much felt as it was before.

The countries of the world should stop being dependent on one particular consumer when it comes to their exports. In this case, they mostly depend on the United States. These economies should diversify and venture to other regions.

Question 2: Explain how the book shifts from national reform proposals to reforming the IMF and supra-national agreements to regulate the global economy and assess the challenges faced with such a shift.

It is noted that to tackle the problem of the economy at times the national reforms just won’t be enough to ensure that a particular country is secure. This is because there are certain international stakeholders whose activities will still end up affecting the financial performance and stability of another nation. In most cases, it is seen that the policies of these international bodies such as the IMF may have significant influence over the nations that are in question. Some of the policies therein may be rather detrimental and for this reason, will have to be reviewed for the nations in question. In essence, the book examines some of the factors that may bring about the shaky global financial problems that are exhibited at times some of these including the interdependence that is exhibited by the countries in question so much so that the downfall of one of the major countries in this interdependence ends up bringing down the other interested parties in the whole association. It is seen that the whole phenomenon goes beyond the borders of a particular nation. Read More