What Are The Weaknesses Faced During The Financial Crisis

The financial crisis from2007 to 2008 is considered the worst financial crisis since the Great Depression of the 1920s and destroyed the U.S. economy severely. It led the housing prices fell 31.8%, the unemployment rate rose a peak of 10% in the United States. Especially the subprime market, began defaulting on their mortgage. Housing industry had collapsed. This crisis was not an accident, it caused by varies of factors. The unregulated securitization system, the US government deregulation, poor monetary policies, the irresponsibility of 3 rating agencies, the massed shadow banking system and so on. From my view, the unregulated private label mortgages securitization is the main contribute factor which led the global financial crisis in 2008.

The financial crisis in America had spread to Europe. Banks in the UK bear the greatest impact from the credit crisis sub-prime housing loans in the U.S. For example, Northern Rock Bank had a bad debt account of up to 191.6 billion U.S. dollars in July 2008 and the Bank of England had to pump 27 billion pounds to rescue Northern Rock Bank. At the end of September 2008, there were some other big banks in Europe such as Dexia and Hypo Real Estate falling in the crisis and these banks were rescured by the governements throught financial bailout. (Alexander, 2008)

When the nancial crisis boomed in the United States in 2007, the worldwide contagion was rapid and extensive and between 2008 and 2012 it turned into a global crisis. One of the most interesting facts 7 is that, while the US managed to recover in 2010, with a GDP growth of 2%, the EU is still

“Since 2007 to mid 2009, global financial markets and systems have been in the grip of the worst financial crisis since the depression era of the late 1920s. Major Banks in the U.S., the U.K. and Europe have collapsed and been bailed out by state aid”. (Valdez and Molyneux, 2010) Identify the main macroeconomic and microeconomic causes that resulted in the above-mentioned crisis and make an assessment of the success or otherwise of the actions taken by the U.K government to resolve the problem.

The European Commission, European Central Bank, and IMF have responded to the continuing Greek debt crisis by insisting that the Greek government continue to impose and expand policy measures that failed during the Great Depression and resulted in a more than 30% drop in Greek GDP since the beginning of the recession. Continuing to impose these measures is the price levied on Greece for obtaining loans required to keep the country “open for business” and to keep its banking system from collapsing. Identify the policy measures and explain the how they pushed the Greek economy into a full-blown

Banking is designed to make it possible for customers to trade, commercialize and invest. It can be regarded as a service to serve the public and prompt the economy (Rosenthal, 2013). There has been much debate concerning whether big banks should be broken up. The collapse of five biggest investment banks in the financial crisis of 2008 has put an increasing number of countries such as Iceland, Ireland and Spain at the edge of bankruptcy (Rosenthal, 2013) and resulted in mass unemployment and a decrease in living standards. It is clear that although large banks perform invaluable functions in economies of scale and scope, providing unique services which are not accessible elsewhere, they also know they are “too big to fail”(hereafter TBTF) for bail-outs provided by governments; therefore, they continue to take excessive risks for higher compensation, which could have a negative influence on the forming of a competitive and stable market. In this essay, I will look at the causes and consequences of the financial crisis and then argue that those reforms proposed are insufficient to reduce the risks of systemic collapse; Thus, these financial sectors should become small enough to be allowed to fail so that they have to consider carefully before taking excessive risks.

One of the principal functions of financial oversight authorities in achieving a safer, more flexible, and more stable monetary and financial system is to regulate and supervise various financial entities. But following the crisis of 2007, regulatory authorities in the whole world were engaged in a fundamental reconsideration of how they approach financial regulation and supervision. Performing these functions through micro- prudential regulation and supervision of banks, holding companies, their affiliates and other entities, including nonbank financial companies, proved to be insufficient to ensure and maintain financial stability of a country, union or the world as a whole.

Austerity works on the principle of decreasing government spending and increasing taxes; as a result, the deficit can be reduced and the country can be back on track financially. But at the same time it does not make sense that by decreasing employment availability, investments in science and technology, and helping different groups of society build their cores, will help all of us achieve a sustainable economy.

Over the past few years of global economic instability, most governments have struggled to find adequate funding to continue providing the much-needed resources to the members of their state. Consequently, this has translated to significant budget cuts and the introduction of strict austerity measures at unprecedented levels.

Austerity in simple terms is basically a policy of making several cuts like reducing domestic wages in order to balance the budget which would remove debt and restore competitiveness within that country. “Austerity is a form of voluntary deflation in which the economy adjusts through the reduction of wages, prices and public spending to restore a country’s competitiveness, which is best achieved by cutting the state’s budget, debts and deficits” (Blyth, 2015,p.2). He gives various examples of countries that have had experiences of austerity such as Denmark, Sweden, Germany, France and America among several others. “For our purposes here, we need only note that the US economy got worse each time austerity was applied, first in 1193 and again

Although banking systems have healed significantly since the financial crisis, there remains considerable variation on a cross-border basis in the way how banks have dealt with legacy issues. Notably, those banking systems that were exposed as being weakly capitalised and highly leveraged in the period leading up to the financial crisis have subsequently reduced their share in total cross-border lending activity in a significant way. In particular, Eurozone banks have reduced their cross-

Over the past ten years, we have seen a weary world with uncertain economic turns with more downswings than upswings. Some might say the worst affected economies have been the once invincible super-powers of the western world such as Western Europe and the United States. The ongoing uncertainties of the Euro as well as numerous bailouts have caused more speculation and fewer expectations. Critics argue that with proper policies and regulations the financial meltdown could have been assessed more efficiently or altogether prevented. The realization of uncontrollable powers such as political environments, foreign economies,

Blyth defines austerity as “the ‘common sense’ on how to pay for the massive increase in public debt caused by the financial crisis”, which comes primarily through the elimination of government services. People knowingly take on debt with the intention to then pay it off-- before the financial crisis of 2008 people took on debt to pay bills and banks took on debt to make money by leveraging. When the crisis hit, the government felt the banks were “too big to fail” (because a crucial part of economic activity in the US is tied up in liquidity of the largest banks) and bailed them out. When a person’s debt becomes too high they pay it down with income rather than continuing to spend and pump money into the economy, or “deleveraging”. In

Since the 1970s the EU has had solvency requirements in place which require a regulatory capital to protect against any unforeseen circumstances. EU states agreed in the 1990s that a review should be put in place to reform and improve standards. Solvency I was the result of this review (Lloyd’s, (no date)).

The author conflates the austere approach with liberal economic policies that distrust that state and see a very limited role in it in regulating a market economy. The strongest element of section two, is the ‘natural history’ of austerity, which considers several examples and demonstrates that the role played by contractionary fiscal policies is overstated. The experiences of austerity in the United Kingdom and United States in the 1920’s to 1930’s and Denmark and Ireland in the 1980’s are considered in the context of the REBLL countries today (Romania, Estonia, Bulgaria, Latvia and