...It is interesting to read how NPD gained its’ success through the waste or trash of the United States and Europe. I think this is right in line with how Mrs. Cheung thinks; she wants to be ahead of all her competitors and gain every competitive advantage possible. By utilizing the paper waste of higher quality products in the US and Europe, she was able to bring this quality back to China where it was nonexistent. As you can see in the reading as well, Mrs. Cheung believes in rapid expansion to maximize revenue opportunity and that long term profits will come from taking on a lot of debt. But even as she said when speaking about the economic crisis: “Now the waves are so big, even some rocks are being washed away.” The economic crisis of 2008 did not only affect the small companies, but also the large and profitable ones like Nine Paper Dragons. I would summarize the company’s financial status as struggling at the point this article was written. The company’s unsecured notes were rated as BBB- in April, 2008 and downgraded even lower to BB+ in October of 2008. On top of that, even though the company had a successful IPO in March of 2006, the debt accumulated after this IPO really hurt the company when the financial crisis hit in 2008. This demonstrates Mrs. Cheung’s vision to take chances and be the market trend setter for her industry. It appeared though that she spread herself too thin through expansion and also through the large amount of debt she...
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...Ieva Massehian ECON 303 N. Pulchritudoff March 7, 2015 Robert Reich’s Aftershock: The Next Economy and America’s Future Robert Reich, former secretary of labor in B. Clinton administration and current professor of Public policy in University of California, Berkley starts his 12th book “Aftershock: The next Economy and America’s future” from presenting well known cause of 2008 economic crisis: ““For too long,” Geithner says, referring to the period leading up to the financial bust, “Americans were buying too much and saving too little.” However, soon it becomes clear that Reich has different point of view what really happened in the wake of the one of the worst economic crisis in world’s history. Author starts his argument by looking back to America’s history and analyzing Great Depression and Great Recession. He is inspired by chairman of Federal Reserve board M. Eccles who was convinced that purchasing power of middle class was reduced by uneven distribution of income. “He draws heavily on his thinking, that the blame lies on a similar but worse economic trauma—the Great Depression—on the vast accumulation of income in the hands of the wealthy in the ’20s, which siphoned purchasing power away from other Americans.” This situation compromised the growth of economy and the economy collapsed. Reich agrees that the stagnation of middle-class buying power has been a drag on growth. “If earnings are inadequate,” he asserts, “an economy produces more goods and services...
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...Nine Paper Dragons Case Questions 1) How does Mrs. Cheung think? What does she believe in when it comes to building her business? It is interesting to read how NPD gained its’ success through the waste or trash of the United States and Europe. I think this is right in line with how Mrs. Cheung thinks; she wants to be ahead of all her competitors and gain every competitive advantage possible. By utilizing the paper waste of higher quality products in the US and Europe, she was able to bring this quality back to China where it was nonexistent. As you can see in the reading as well, Mrs. Cheung believes in rapid expansion to maximize revenue opportunity and that long term profits will come from taking on a lot of debt. But even as she said when speaking about the economic crisis: “Now the waves are so big, even some rocks are being washed away.” The economic crisis of 2008 did not only affect the small companies, but also the large and profitable ones like Nine Paper Dragons. 2) How would you summarize the company’s financial status? How does it reflect the business development goals and strategies employed by Mrs. Cheung? I would summarize the company’s financial status as struggling at the point this article was written. The company’s unsecured notes were rated as BBB- in April, 2008 and downgraded even lower to BB+ in October of 2008. On top of that, even though the company had a successful IPO in March of 2006, the debt accumulated after this IPO really hurt...
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...Wall Street Financial Crisis Student’s Name Institution Date Paper Draft Introduction Background of the crisis. The effects and impact of the financial crisis. Results of preliminary reports. Sociological perspective of financial crisis The aspect of sociology in financial crises Senate’s investigative report The key players and their roles Why the workers remained unknowing The sociological explanation of the unpredictability of the crisis Conclusion Introduction The Financial Crisis of 2008 was described by economists, analysts and even sociologist as the worst and most devastating economic crisis since the 1930s Great Depression. It threatened a total collapse of huge financial institutions, banks bailout by governments, and major downturns in security's exchange around the world characterized this dark economic year. The housing sector in many areas in the world t also suffered, with the result being forced and unnoticed evictions (Coxe, 2005). Many people lost their jobs and there was a prolonged unemployment leading to family crisis and debts. Key businesses including banks failed and there was a huge decline in the consumer profits. The small unsecured financial institutions suffered the worst ever insolvency resulting from bank runs that characterized this period. The declines in consumer wealth were estimated in trillions of U.S. dollars. All these activities took a very short active phase, manifested as a liquidity crisis, and dated from August 9...
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...Explain the term “credit crunch” and how it has developed. Discuss the implications for UK Small and Medium Enterprises (SMEs). This essay will look at explaining the term credit crunch, as to what it means and how it has been applied to within the global economy. More so the essay will cover how the credit crunch of 2007 has developed over time, with the key aspect of the US housing market developing to then impact other countries, such as the UK economy. The essay will discuss the implications on UK small and medium enterprises. One of the key issues which will be discussed as to the implication of the credit crunch, is the availability of finance to SMEs. More so other non direct aspects which have which act as implications will too be discussed. The credit crunch has been defined as a shortage of money or loans as well as other types of credit given by banks. In short the BBC defined the credit crunch as “a severe shortage of money or credit” BBC: Timeline: Credit crunch to downturn (2009) It describes the economic condition of an economy. In most situations, when an economy has been in a credit crunch, the economic condition of a country is unstable or also known as a financial crisis. As the Guardian states, “the current global financial crisis is commonly known as the credit crunch.” Kollewe (2008) Credit crunch’s can occur mostly when an economy is in a recession, a time when the economy is declining during which the there is fall in gross domestic product (GDP). ...
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...Biology and Credit Crunch Biology is the science of organic life and the natural world. Even though it might seem at first that biology and finance might be poles apart and have nothing in common with each other, it is t is something that is fast helping economists in building various new models to understand how the financial sector works. It has also been noted that many scholars believe that a better understanding of biology in terms of our ecology could have worked to warn us of the impending credit crunch that occurred in 2008 and could have helped us prevent it from happening. This might sound like something that is impossible; however, some scientists that are working with the Bank of England believe that biological sciences have a lot of lessons to teach us about finance. In this respect, such scientists urge people to think out of the box and be able to better understand their ideas about finance and biology. In this respect, we find that experts that delve in the financial aspects of our lives are looking at other disciplines to help them better understand the workings of finance and the financial world. Just like the credit crunch has an effect on biology in terms of biotech research (Mitchell 359), the biological systems also had an effect on how we perceive the financial systems. It has to be noted that the banking industry has been borrowing ideas from science for a long time. For instance, we find that the computer technological revolution that occurred in...
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...Credit Crunch An economic condition in which investment capital is difficult to obtain. Banks and investors become wary of lending funds to corporations, which drives up the price of debt products for borrowers. Credit crunches are usually considered to be an extension of recessions. A credit crunch makes it nearly impossible for companies to borrow because lenders are scared of bankruptcies or defaults, which results in higher rates. The consequence is a prolonged recession (or slower recovery), which occurs as a result of the shrinking credit supply The global credit crunch, which has dominated financial news headlines over recent months, continues to wreak havoc across the UK. Since it made its way across the Atlantic last summer the credit crunch has taken its toll in all financial sectors, and has made things difficult for both lenders and consumers. Many lenders have been hit hard, because the crunch has resulted in increased difficulties in getting finance on the wholesale money markets and increased costs relating to inter-bank lending. This means that lenders are finding it more difficult and more expensive to raise the finance that they need to fund their lending. Over recent months an increasing number of consumers have found that trying to get any form of credit has become more difficult and expensive, and this is because of the action taken by lenders to try and protect themselves as much as possible from the effects of the crunch. Lenders have raised interest...
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...Table of contents 1. Introduction ................................................................................................................................... 1 1.1. 1.2. 1.3. Structure of the report.............................................................................................................. 1 Mc Donald’s’ Business Model ................................................................................................ 1 Credit crunch ........................................................................................................................... 1 2. Theoretical framework ................................................................................................................. 2 2.1. The credit crunch 2008 ............................................................................................................ 2 The deregulation of the financial markets ....................................................................... 2 The U.S. housing market ................................................................................................. 2 Consequences of the subprime mortgage crisis............................................................... 3 Impact on businesses and consumers in the U.S. ............................................................ 4 2.1.1. 2.1.2. 2.1.3. 2.1.4. 2.2. 2.3. 2.4. 3. SWOT analysis ...................................................................................................
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...| CONTENTS: 1. Introduction 2. Credit Crunch 3. Covered Bonds 4. Basic Assumptions 5. Analysis * Covered Bonds and the Financial Crisis in Europe * Effect of Covered Bonds on Bank Margin * Covered Bond as a means of liquidity and funding base 6. Conclusion 7. References Question 1 Does offering covered bonds hold the answer to credit rationing (credit crunch) in a financial crisis or does it just offer banks the opportunity to increase their margin? Discuss critically. Introduction In the US, credit crisis of 2007-2008 demolished the securitized mortgage bonds and many of the participants left the market never to recommit themselves in the near future. This lead to an drop in securitized debt issuance where the banks began to hoard cash and reduce consumer lending leading. The US Treasury to take measures to revitalise the financial market to encourage investors to buy loan from banks book. They shifted their focus onto the European Financial Market System which managed to minimise the impact of the credit crunch through its well established covered bond program. Credit Crunch Credit crunch is explained as a period of increased non price credit rationing beyond that of typical recessions whereby credit has become less affordable or less available. Owens, Schreft and Stacey,( 1995). To banks, this will result in a funding liquidity risk as “the possibility that over a specific horizon the bank will become unable to settle obligations...
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...In the most recent recession, credit crunch (2007-08) has played a complex role than earlier crunches because financial innovation has allowed new ways of packaging and reselling assets. It was triggered with the growth of the subprime mortgage market in the United States which was caused due to nonstandard mortgages to individuals with irregular income or unknown credit profiles. Based on subprime and other nonstandard mortgages, new assets were developed which were then sold to investors in the form of repackaged debt securities of increasing sophistication. These new assets received a very high rating and were considered safe compared with more conventional asset classes. These newly developed assets provided good returns compared to other asset classes. However, they were not as safe as the ratings suggested, because their value was closely tied to movement in house prices. While house prices were rising, these assets offered relatively high returns compared with other assets with similar risk ratings; but, when house prices began to fall, foreclosures on mortgages increased. To make matters worse investors had concentrated risks by leveraging their holdings of mortgages in securitized assets, so their losses were multiplied. Investors realized that they had not fully understood the scale of the likely losses on these assets, which sent shock waves through financial markets, and financial institutions struggled to determine the degree of their exposure to potential losses...
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...1 Introduction Banking is an important institution in the economy and plays a very important role in the economic life and economic growth of any society. While it is of common understanding that banking is not “The Economy”, it is agreed that the health of the country’s economy is closely related to the soundness of its banking system which can be sustained through strict regulations and supervision in order to monitor and control business risks such as Capital Risks, Liquidity Risks, Credit Risks, Exchange Risks, Operational Risks, Market Risks and Legal Risks. Bank regulations and bank supervision are required to facilitate a ‘Systematic Risk Reduction’ approach thus reducing the risk of adverse trading conditions and to ensure that Financial Institutions satisfy at least the minimum ‘Prudential’ requirements in order to reduce the risk factor that creditors are exposed to. Lack in regulations and slack in supervision may lead to Financial Institutions risking bankruptcy thus exposing their clients of potentially losing their investments and financial assets while distressing the country’s economy. 2 What is the actual function of a bank within an economy? Banks' traditional role is primarily that of an intermediary for money, i.e. granting loans, processing payments, accepting deposits, carrying out investments, etc... Although banks do not create new wealth, through borrowing, lending and related activities they facilitate...
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...The European Economic Crisis A Paper Submitted to Webber International University In partial fulfilment for the Bachelor of Science Degree in Finance By: James Holt Date: November 26, 2013 Course: ENG112-1 Semester: Fall 2013 Instructor: Professor Nancy Davis Word Count: 2663 The European economy is in turmoil. The credit crunch in 2008 caused chaos throughout the global and European economic systems and highlighted the negligence of not only governments but also the financial systems in place. In the highly praised publication the Economist the author G. Tett writes “The European economy is in the midst of the deepest recession since the 1930s, with real GDP projected to shrink by some 4% in 2009, the sharpest contraction in the history of the European Union. Although signs of improvement have appeared recently, recovery remains uncertain and fragile” (Tett, 2013). A publication of this magnitude publishing this shows the utter chaos in the European Economy. The economy of all countries within the Euro has been greatly affected; it has also affected the surrounding countries around the Eurozone. The stronger European economies have recovered a great deal these include...
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...increase in global competition mainly because of globalization, fast-growing technology, which eliminates low-skilled workers from the job market and low American educational grades compared to other countries. In the article “Digging Deeper Into What Caused Job Losses” by Casey B. Mulligan the author argues that unemployment was not caused by credit-crunch or demand-based theories. He gives arguments why those theories are not accurate which indirectly approve and agree with the first article. Unemployment in The United States caused by global competition, fast-growing technology and lack of qualitative education and not caused by credit-crunch or product demands. The first deep problem fostering unemployment is global competition. “And as the education systems of China, India, Singapore, Poland and Vietnam continue to improve, and more of their cream rises to the top and more of their young people apply to ivy League schools, it is only going to get more competitive for American men and women at every school”. The author states that it is become really hard to compete with other countries, because their growing education. He gave us an example of Harvard University, which was first attended only by males, and then they allow females to enter the university and after the ending of cold war people from different countries were able to study there. It becomes really hard for white males to compete. Another deep problem of unemployment is technology. The author argued that “technology...
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...1. Introduction The Global financial and economic crisis in 2007 and a liquidity crisis of the world's leading banks force us to reconsider the debt relations. Credit boom accompanied by rising debt payments, could not continue persistently. Debt servicing was possible only with high incomes or assets value of the debtor, and as soon as the growth of income or assets stopped, the debtors have faced problems in servicing their debts: in spite of the decline in income and assets value of debt borrowers’ debt during the crisis did not reduce. As a result, the debtors faced decoupling of debts from assets. According to Minsky decoupling between firms’ debt and assets, or the debt crisis caused by the cyclical nature of economic development: at...
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...What are the causes of the global financial crisis? Name: Course: Tutor: Date: What are the causes of the global financial crisis? Introduction Achieving stability has always been the number one priority in any county or organization. Financial stability is probably one of the most sort after achievement everywhere in the world. When a country or company fails to attaining financial stability then things are deemed to go wrong. The global financial crisis brought about the worst kind of financial instability in the global economy. It started in the United States and spread all over the world like wild fire. Even the top performing economies in Asia like China were not left out. This economic turbulence brought about both economic and social hardships (Helleiner,1994) . This was partly blamed on the already established Capitalist ideologies that prevailed especially in the United States. This crisis exposed most economies to financial difficulties as it proved the dependence of most nations on dollar denominated financial transactions. The only way to salvage these economies was through fiscal and monetary interventions by the Governments of the day. Bail-out packages were presented to major economy drivers and industries to help ease the financial crisis that had affected their operation. The collapsing of large financial institutions like the Lehman Brothers bank brought about a lot of chaos in the industry. Large bailout packages were used to help revive...
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