Global Economic Crises

The current financial crisis is the worst the world has seen since the Great Depression of the 1930s. For younger generations, accustomed to mild recessions of the new phase of globalization, the misery of the Great Depression is hitherto nothing more than a distant legend. However, the collapse of two Bear Stearns Hedge funds in summer of 2007 exposed what came to be known as the subprime mortgage crisis, reintroducing the world to an era of bank failures, a credit crunch, private defaults and massive layoffs. In the new, globalized world of closely interdependent economies, the crisis affected almost every part of the world, receiving extensive coverage in the international media. “In an Interconnected World, American Homeowner Woes Can Be Felt from Beijing to Rio de Janeiro,” observed the International Herald Tribune at the onset of the crisis. “Chinese Steelmakers Shiver, Indian Miners Catch Flu,” noted the Hindustan Times. “US and China Must Tame Imbalances Together,” suggested YaleGlobal, as the frenzied search for a solution continues around the globe.

In this special report, YaleGlobal offers essential information on why the crisis started, how it affected the industries and consumers around the world, and what solutions have been proposed by experts and regulators across countries.

Many causes for the financial crisis have been suggested, with varying weight assigned by experts. The U.S. Senate's The U.S. Senate's 

Levin–Coburn Report asserted that the crisis was the result of "high risk, complex financial products; undisclosed conflicts of interest; the failure of regulators, the credit rating agencies, and the market itself to rein in the excesses of Wall Street". The 1999 repeal of the Glass-Steagall Act effectively removed the separation between investment banks and depository banks in the United States. Critics argued that credit rating agencies and investors failed to accurately price the risk involved withmortgage-related financial products, and that governments did not adjust their regulatory practices to address 21st-century financial markets. Research into the causes of the financial crisis has also focused on the role of interest rate spreads.

Background

The immediate cause or trigger of the crisis was the bursting of the United States housing bubble which peaked in approximately 2005–2006. Already-rising default rates on "subprime" and adjustable-rate mortgages (ARM) began to increase quickly thereafter. As banks began to give out more loans to potential home owners, housing prices began to rise.

Easy availability of credit in the U.S., fueled by large inflows of foreign funds after the Russian debt crisis and Asian financial crisis of the 1997–1998 period, led to a housing construction boom and facilitated debt-financed consumer spending. Lax lending standards and rising real estate prices also contributed to the Real estate bubble. Loans of various were easy to obtain and consumers assumed an unprecedented debt load.

Subprime

During a period of intense competition between mortgage lenders for revenue and market share, and when the supply of creditworthy borrowers was limited, mortgage lenders relaxed underwriting standards and originated riskier mortgages to less creditworthy borrowers. In the view of some analysts, the relatively conservative Government Sponsored Enterprises (GSEs) policed mortgage originators and maintained relatively high underwriting standards prior to 2003. However, as market power shifted from securitizers to originators and as intense competition from private securitizers undermined GSE power, mortgage standards declined and risky loans proliferated. The worst loans were originated in 2004–2007, the years of the most intense competition between securitizers and the lowest market share for the GSEs.

Stabilization

The U.S. recession that began in December 2007 ended in June 2009, according to the U.S. National Bureau of Economic Research (NBER) and the financial crisis appears to have ended about the same time. In April 2009 TIME Magazine declared "More Quickly Than It Began, The Banking Crisis Is Over. The United States Financial Crisis Inquiry Commission dates the crisis to 2008. President Barack Obama declared on January 27, 2010, "the markets are now stabilized, and we've recovered most of the money we spent on the banks.

The New York Times identifies March 2009 as the "nadir of the crisis" and notes that "Most stock markets around the world are at least 75 percent higher than they were then. Financial stocks, which led the markets down, have also led them up." Nevertheless, the lack of fundamental changes in banking and financial markets, worries many market participants, including the International Monetary Fund.

Media coverage

The financial crises generated many articles and books outside of the scholarly and financial press, including articles and books by author William Greider, economist Michael Hudson, author and former bond salesman Michael Lewis, Kevin Phillips, and investment broker Peter Schiff.

In May 2010 premiered Overdose: A Film about the Next Financial Crisis, a documentary about how the financial crisis came about and how the solutions that have been applied by many governments are setting the stage for the next crisis. The film is based on the book Financial Fiasco by Johan Norberg and features Alan Greenspan, with funding from the libertarian think tank The Cato Institute. Greenspan is responsible for de-regulating the derivatives market while chairman of the Federal Reserve.

In October 2010, a documentary film about the crisis, Inside Job directed by Charles Ferguson, was released by Sony Pictures Classics. It was awarded an Academy Award for Best Documentary of 2010.

Time Magazine named "25 People to Blame for the Financial Crisis”.

Emerging and developing economies drive global economic growth

The financial crisis has caused the "emerging" and "developing" economies to replace "advanced" economies to lead global economic growth. Previously "advanced" economies accounted for only 29% of incremental global nominal GDP while emerging and developing economies accounted for 71% of incremental global nominal GDP from 2007 to 2013 according to International Monetary Fund. In this graph, the names of emergent economies are shown in boldface type, while the names of developed economies are in.

 Universities and Colleges offer lot of advanced degree courses in Finance with thesis and Research programmers. Online Institutes like Onlinehomeworksite also offers Special Online courses in Finance assignment help, Finance homework help and tutoring services. Students must use of these service and excel in their studies. For further details contact them at for a free quote: info@onlinehomeworksite.com.