Critical Examination of the 2008 Financial Crisis - Contagion, Economic Impacts, and Remedies - Term Paper Example

The paper “Critical Examination of the 2008 Financial Crisis - Contagion, Economic Impacts, and Remedies” is a detailed example of a macro & microeconomics term paper. The 2008 World financial crisis had substantial impacts on most economies and to date, some countries are still reeling from its effects. It is considered by most experts in the field to be the worst financial crisis since the Great Depression of the 1930s. The financial crisis did threaten the collapse of most large institutions in the world, with the worst being those in the United States of America.

Some of the most affected institutions were in the financial and automotive industries and required government intervention to remain afloat. In cases where governments did not step in to offer bailout packages, institutions were forced to close their doors. One such example was the Leman brothers, one of the oldest financial institutions in the US that declared bankruptcy before getting liquidated when it could not meet the requirements placed to receive a bailout package from the Federal government.

The effects of the financial crisis were far-reaching; nearly all economic sectors, as well as individuals, were affected. A large number of people lost their jobs and had to find supplementary ways of making money (Allen & Carletti, 2009). The causes behind the crisis are not quite clear but evidence shows that the origin of the problem emanated from the financial industry. The practices and conduct of financial institutions in the way that they gave and underwrote loans were largely to blame for the financial crisis.

After, the fall of the Lehman Brothers in 2008, the stage was set for a cataclysmic event. Investors pulled out their money from the stock market and consequently, businesses faced liquidity problems. Signs of an impending global meltdown had begun to prop up in other major economies too, including; the UK and the EU. Large current deficits, weak monetary policies in the US, misperception of risk, loose financial regulations, and an overdependence on excessive savings of emerging markets and large oil exporters were noticeable signals in these markets, overdependence on.

However, nothing was down to this effect (Verick & Islam, 2010).