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Global Financial Crisis in Context - Essay Example

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This paper notes that the aftershocks of the recent global financial crisis such as retrained bank lending and high unemployment are bound to linger throughout the year. There are signs of the labor markets improving and thus providing imputes to the growth of a self-sustaining economy. …
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Global Financial Crisis in Context
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Download file to see previous pages There is the general consensus across the globe that the 2007-2010 global financial crisis (GFC) is the worst to have hit the world economies ever since the famous Great Depression during the 1030s. To some this crisis has grown to be known as the Great Recession of the time. One of the notable effects of the recent global financial crisis was brought to the fore in terms of failure by the world’s key businesses, significant decline in the wealth among consumers, as well as massive financial commitments by the various governments. In the overall, the aforementioned effects culminated into significant reduction in the economic activities amongst nations. The said financial crisis has its cradle in the bursting of America’s housing bubble. In particular, this housing bubble experienced its peak during the 2005- 2006 period. Immediately afterwards, there was a general increase in the Adjustable Rate Mortgages (ARM) and subprime default rates. As it is put forward by Taylor and Akila, (2009), a resultant increase in incentives of loans for example, simple easy terms as well as long-term trend of increasing prices of housing. As a result, borrowers had been motivated to take difficult mortgages with the hope of being able to quickly refinance them at favorable terms.
However, with the increasing interest rates, prices of housing began to drop although moderately during the 2006-2007 period in several parts of the United States of America. Consequently, refinancing became much more difficult. This provided the much needed impetus to the increase in foreclosures and defaults due to the expiry of the simple initial terms. ...Download file to see next pagesRead More
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