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The Financial Crisis in 2008 - Research Paper Example

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This paper discusses the Financial Crisis in 2008, its impacts on the world’s economies and their response. It cites several views on this subject and gives an evaluation of these views. The paper explains how the crisis has taken hold of the world significantly undermining its trade and economy…
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The Financial Crisis in 2008
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Download file to see previous pages As a result, there has been a severe depreciation of the financial currency, the downturn of economic indicators and an increase in unemployment among others. This has made the world’s economic outlook unpredictable and has severely threatened global economic order. Additionally, the future international community’s sustainable development faces a serious challenge. The financial crisis is a situation in which the demand for money outpaces money supply – available money is withdrawn from banks rapidly evaporating liquidity and forcing banks to either collapse or to vend other investments in an attempt to compensate the deficit. We can also define financial crisis as a sharp decline of a set of financial indicators, for example, asset prices and short‐term interest rates, which goes hand in hand with financial institutions’ failures. When there is a financial crisis, financial markets are disrupted and they cannot efficiently direct finances to those with investment opportunities that are most productive. Consequently, a financial crisis shifts the economy to equilibrium with a sharp decline of output from one with high output wherein there is a great performance of financial markets (, para1).
The 2008 financial crises started in the United States due to the United States’ housing bubble-burst negatively affecting the country’s economic development. It led to a severe financial crisis that spread around the world rapidly. Due to globalization, trade, stock, and financial markets, housing, goods, and services are closely inter-connected worldwide. This has resulted in greater global interdependence. Being the largest economy in the world, any slowdown in the United States’ economy will inexorably spread to other countries. The nature of this crisis has made many people measure it up to the great depression of 1929. ...Download file to see next pagesRead More
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