Exploring the Contagion and Its Effect on Macroeconomic Conditions

In early America, there was a system called slavery in which people would purchase other humans to work for them for no pay and often cruel treatment was involved. Many people today would find this asinine or ridiculous, questioning why another human being would ever have to though cross their mind about doing this, but this was the harsh reality of what slaves had to face. People were ripped from their homeland, chained and put on ships, an action no one could atone for. In 1776, most of the American colonies allowed slavery, but when we fought for our freedom from Britain the northern colonies began to end slavery. The slave population in the south began to augment. People, both black and white, began to speak against slavery and tried to

This epidemic is the spread of market downside from country to country and is a spill-over effect that is influenced by the agents’ four behaviors which are governments, financial institutions, investors, and borrowers. Financial contagion happens to both advanced economies and developing countries and causes financial volatility. It affects countries capital flows, exchange rates, and stock prices. The contagion contains problems such as irrational phenomena, macroeconomic shocks that cause local shocks passed through competitive devaluations, trade links, and financial

Fatima Avery Antonio Kalugin PHIL 165 7 October 2014 Immanuel Kant Chapter One Summary In Chapter One of German philosopher Immanuel Kants’ article “Fundamental Principles of the Metaphysics of Morals,” Kant defines his ideas and opinions; specifically on the basic principles good will, what defines it, and the practices of it. He also speaks on morality and the shift from “common-sense knowledge” to morality itself. Kant says that a person’s inner worth is determined by their pure will and good intentions.

“Covenants were a common feature of life in the ANE, and played an important part in business, politics and family life, as well as in religion.” (163) Covenants were unbreakable and were taken as a very serious commitment done by two or more people. The covenant with Abraham (Gen 15, 17) Covenant of grant that also obligated God to oversee the promises made to Abraham. Abraham’s posterity in view requires obedience on the part of the Israelites. The Sinaitic (Mosaic) covenant is Israel’s election based on God’s initiative, grace, and love. Israel is Kingdom of Priests and a Holy Nation. Freed from bondage for relationship with Yahweh. Noahic Covenants (Gen 9:8-17) Universal covenant in scope and application. Made with Noah and his

Previously stated, the federal funds rate was cut to as low as 1% during the early 2000’s. Not only did this turn investors away from investing in treasury bonds, but it also cheapened the cost of borrowing money for banks. This spurred action on behalf of financial institutions to offer investments connected to the continually increasing, and seemingly risk-free, housing market. Due to a combination of greed and ignorance on behalf of financial institutions and credit rating agencies, the proverbial housing bubble increased until it finally reached its peak in 2006, and then began to burst at the end of that year and on into 2007. What exacerbated the decline to such a high degree was the strong connectivity of the financial institutions through their complex transactions that related to mortgages. The main factors that were involved in the impending crash were the increased offering of subprime mortgage loans and collateralized debt obligations, or CDOs. Critically analyzing the effects of these products will aid in the conversation of financial institutions role in sparking The Great Recession.

The subprime mortgage crisis that took place in the united states was the start of events that led to the (2008) financial crisis, marked by a hike in subprime mortgage defaults and foreclosures. I seek to discuss in my paper the U.S. causes that eventually led to the subprime mortgage crisis. Like, low interest rates and housing prices, and how this eventually led to a localized credit dilemma in other financial regions that finally made a difference in the actual economy or the financial system. In earlier years, financial economic activity had grown rapidly and varying financial invention methods had been misused and abused vastly, which is the key cause of this multinational financial crisis/dilemma. In addition, the involvement of shadow banking companies as they played an important role in the collapse of the financial system crisis. Furthermore, I plan to list each economic issues included in this subprime mortgage crisis, as well as, other factors that eventually led to this crisis. I will be answering questions, such as the relief measures that were used to restore life to the weakened financial system.

The global credit crunch of 2007-2008 had a rippling effect on economies worldwide and was considered by many economists to be the worst financial crisis since the Great Depression of the 1930s. The crisis was mainly caused by the increased use of high risk, complex financial products (mainly subprime mortgages) to give

Also, since global equity markets are closely interlinked through institutional investors, financial crisis affecting these investors sees a contagion effect throughout the world. The panic psychology takes over and a large number of people cash in their chips. This disturbs global financial market further.

In 2008 the world economy faced its most dangerous crisis since the Great Depression of the 1930s. The contagion, which began in 2007 when sky-high home prices in the United States finally turned decisively downward, spread quickly, first to the entire U.S. financial sector and then to financial markets overseas.

In the financial network literature, cite{alleng} provide microeconomic foundations for financial contagion. Using a liquidity preference model in which a shock to one part of the economy can spread to other parts and potentially lead to an economy wide financial crisis, they find evidence connectivity and incompleteness are conductive of contagion. Similarly, cite{freix} analyse the stability of the banking system when one bank becomes insolvent, the role of the central bank and the effect on market discipline. They use a model of payment flows similar to cite{dd} and find that connectedness boosts resilience of the system but the too-big-to-fail policy has moral hazard implications when the central bank intervenes to allow an insolvent bank to continue operating. On the other hand, cite{bru} model contagion in the interbank deposit market, using the return on the gambling asset as the mechanism of contagion in this network. They find greater connectivity increases contagion risk through two channels, the first is that banks make more risky investments given that more financial

The financial crisis, beginning in 2007, negatively impacted the stability of financial institutions and markets across the world. While there are many speculative causes of the financial crisis, dealings in subprime mortgages are considered the biggest culprit. As a result, those involved in subprime mortgages, such as lenders, investment banks, credit rating agencies and securities investors were among the first to feel the crisis’ ramifications. Moreover, adjustments made to lending stipulations and interest rates produced a housing bubble within the United States priming the market for an inevitable collapse. Once the housing bubble burst, the risk associated with subprime

This crisis was better known as subprime mortgage crisis due to the household credit financed by financial institutions, especially

An economic event intertwined with credit crunch is the U.S. subprime mortgage crisis. In 2007, the subprime mortgage crisis dealt a huge economic blow to America and then had a great impact on the world economy. Although several actions, such as lowered the target for Federal funds rate and the discount rate, were taken, the crisis still had severe, long-lasting consequences, which makes the world economy still in a slow recovery so far. The credit crunch of 2007 was triggered by several factors. Analyzing the cause of credit crunch can help us reduce the probability of it and then prevent financial crisis in the future.

The world’s economy has changed enormously in the past decade due to the different reasons and causes. Credit crunch in 2007 was one of the unforgettable situations which has been considerably affecting the global economy until now. Great recession started from the US and hit many countries around the world as it is the biggest financial market. Credit crunch refers to a sudden shortage of funds for lending, leading to a resulting decline in loans available (Pettingger, 2011). Credit crunch was one of the ‘cruel’ outcomes from the 2007 subprime crisis in the United States, when most of subprime borrowers defaulted and many commercial and investment banks in the United States have gone bankrupted as they failed to receive the loan from the borrowers. This led to the the credit crunch due to the limited amount of money that banks are willing to take on loan and the freeze in money market. There was less liquidity in money market and most of business owners were affected because there was fewer cash flow in business and the whole economy. However, there are various reasons that cause credit crunch for example, sudden increase in interest rates, direct money controls by the government and a drying up of funds in the capital market (Pettingger, 2011). It can be seen that 2007 credit crunch occurred due to the deficiency of funds in money market as a result from the collapse of big financial firms in the United States. In this essay, I will explain how perceived credit risk

The literature identifies multiple mechanisms of contagion which were possible explanations for the global spread of the subprime crisis. Longstaff (2008) elaborates on three of these mechanisms and finds empirical support for two of these mechanism’s roles in the subprime crisis. First of all, the information correlation view argues that contagion occurs as economic news representing negative shocks in one market, affect values of securities in another less liquid market or market with lower price-discovery. The second mechanism is liquidity induced contagion that occurs through a liquidity shock affecting all markets. As investors suffering losses in one market have difficulty acquiring funding, this results in a downward spiral of overall liquidity. Thirdly, the risk premium view of contagion argues that severe negative shocks in one market may lead to an