...The term financial crisis is applied broadly to a variety of situations in which some financial institutions or assets suddenly lose a large part of their value. In the 19th and early 20th centuries, many financial crises were associated with banking panics, and many recessions coincided with these panics. Other situations that are often called financial crises include stock market crashes and the bursting of other financial bubbles, currency crises, and sovereign defaults.[1][2] Financial crises directly result in a loss of paper wealth; they do not directly result in changes in the real economy unless a recession or depression follows. Many economists have offered theories about how financial crises develop and how they could be prevented. There is little consensus, however, and financial crises are still a regular occurrence around the world. Banking crisis Main article: Bank run When a bank suffers a sudden rush of withdrawals by depositors, this is called a bank run. Since banks lend out most of the cash they receive in deposits (see fractional-reserve banking), it is difficult for them to quickly pay back all deposits if these are suddenly demanded, so a run may leave the bank in bankruptcy, causing many depositors to lose their savings unless they are covered by deposit insurance. A situation in which bank runs are widespread is called a systemic banking crisis or just a banking panic. A situation without widespread bank runs, but in which banks are reluctant to lend...
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...Sample Article: The Financial Crisis in Spain Summary Unemployment in Spain has reached 17.4 percent, according to figures released April 24 by the National Statistics Institute. Even without the global recession, Spain's economy likely would be going through a rough patch now due to the country's overheated housing market; with the recession, it is also suffering from a banking crisis and an industrial slump. Analysis Spain's unemployment rate rose from 13.9 percent in the fourth quarter of 2008 to 17.4 percent in the first quarter of 2009, increasing the ranks of the unemployed to more than 4 million, according to National Statistics Institute (INE) figures released on April 24. Spanish Economy Minister Elena Salgado said that the first quarter of 2009 will be the worst in terms of increasing unemployment. The International Monetary Fund (IMF) predicts that unemployment in Spain will reach 17.7 percent in 2009 and 19.3 percent in 2010, but the INE figures seem to indicate that unemployment could exceed 20 percent by the end of 2009. Of all the European countries, Spain has in many ways been one of the most gravely affected by the global economic crisis. Even without the global recession, Spain would most likely be undergoing a correction this year due to its extremely overheated housing market. But it is facing a severe housing market correction, an industrial slump, and a banking crisis caused by the housing correction and the recession's overall effects -- simultaneously...
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...Introduction Global financial crisis started when sub prime mortgage market of United States collapsed. Since the global financial crisis took place, many developed and developing countries have been going through recession. It was believed that ongoing global financial crisis will not affect Bangladesh economy as badly as it can to other developed economy because economy of Bangladesh is not so dependent on international capital or foreign investment. But, still there are and will be some shocks of ongoing global financial crisis available for Bangladesh economy. So, Bangladesh economy will be affected by global financial crisis. Global financial crisis might reduce overseas job opportunities and export earnings. Global financial crisis may turn into a recession. Economy of developing countries including Bangladesh is already going through recession. Bangladesh is a low income country. If global financial crisis continuous then economy of Bangladesh will be suffering. Negative impacts of global financial crisis are beginning to show on the increasingly globalizing economy of Bangladesh. Export growth rate of Bangladesh has turned negative. Export of non-apparels items is being reduced. Depreciation of currencies by competing countries caused erosion of Bangladesh’s competitive strength in the global market. Remittance earnings could be badly affected in near future because number of job seekers going abroad halved as some countries either revoked or have stopped issuing...
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... | |The 2008 Financial Crisis | |A Review and Critique | | | |Nicholas Makris | |12/4/2012 | | | Introduction The 2009 economic crisis was significant for two reasons: the rapid rate at which the free market constraints were dropped, and the lack of any stable resolution by the Left (Mellor, 2009). Tenets pertaining to market domination suffered a lethal crack owing to multiple nations realizing the inessential communization, rather than the actual, of economic arrangement (Mellor, 2009). The core of the problem was complicated, but simplification showed it was the nonstandard arrangement of the monetary system that created a complicated scope of financial tools and entities to be...
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...After Economic Crisis Macroeconomics- In 2008, the economy began to decline and globally a financial crisis began. Here in the U.S., the housing market began to plummet, which created the Housing Bubble; also countries worldwide were trying everything to protect their assets. This Global Financial Crisis of 2008 has been compared to being worse than the Great Depression in the 1930s. The world’s economy has not been this unstable since then. The question is, what did we learn and what are we going to do differently to avoid this type global economic instability? In 2011, a group of economists met with the International Monetary Fund to discuss this very question. After reviewing the economists Robert Solow, Michael Spence and Joseph Stilglitz stating their views and opinions, I understand the situation better. I agree with some of the comments that these economists discussed. Ultimately, there is no quick fix for the global economy to grow and remain stable. However these economists mention some very great ideas and make a good point. Professor Solow discusses that it is not to increase the economy we need to increase the amount of qualified workers. He states that perhaps it is not enough just to look at the amount of education we are providing throughout the countries. Solow suggests that we should consider the content of the education as well. I agree with Professor Solow. It is not enough to teach everyone the same thing across the board...
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...the company looks to expand their operations. BHP-B Petroleum produced over 376,000 barrels of oil per day in 2009 and has maintained an impressive 9% annual growth rate since 2007. (Petroleum Annual Review, 2009 pp 5) BHP Petroleum operates in many countries across the world and is currently undertaking oil and gas projects in Australia, The Gulf of Mexico, Algeria, the UK, Pakistan and Trinidad and Tobago with the intention to expand into Malaysia, the Fawklands and Canada in the near future. (PAR, 2009 pp 5) The market for petroleum and indeed the mining industry as a whole was unsure what effect the global financial crisis would have and what action affected parties would take during the period. Regardless of the changes, such a large and important company as BHP would have to study the potential changes and start, if necessary, reformatting their financial planning/strategies and other control processes. These would have to be looked at on a whole organisational level; ranging from the BHP hierarchy all the way down to the smaller subsidiaries in order to accurately gauge the potential effects of the changes in the market. BHP put itself in a really good position early in the piece with its sensible investment strategy. BHP management identify, as they did in previous year reports, the need for caution whilst guiding such a large company through the current global recession. This recession equated to a slowing of activity in the commodities market which would have been...
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...Fakultet:Ekonomski nauki –Strumica Financial Crisis -esej- Predmet:Angliski jazik 1 Izrabotil: Profesor:Natka Jankova Elena Garvanlieva Indeks: 9532 Strumica,dekemvri 2012 Throughout the history and even today we often hear about the term financial crisis. Every day on the news we can hear about the financial crisis in some countries and how they are trying to prevent it or to get out of it. Especially about the financial crisis in Greece. So what exactly is financial crisis? There have been a lot of definition of what financial crisis is, but they all agree in one thing financial crisis appears when some institution or assets suddenly lose a large part of their value. In the 19th and early 20th centuries, many financial crises were associated with banking panics, and many recessions coincided with these panics. Other situations that are often called financial crisis include stock market crashes and the bursting of other financial bubbles, currency crises and sovereign defaults. There a lot of types of financial crisis: banking crisis, speculative bubbles and crushes, wilder economic crisis and other crisis. But from all of them, today the most frequent financial crisis is the banking crisis. This happens when a...
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...Journal of Contemporary Eastern Asia ISSN 2383-9449 Fumitaka Furuoka, Beatrice Lim, Catherine Jikunan and Lo May Chiun (2012) Economics Crisis and Response: Case Study of Malaysia’s Responses to Asian Financial Crisis Journal of Contemporary Eastern Asia Vol. 11, No. 1: 43-56 Journal abbreviation: J. Contemp. East. Asia Stable URL: http://eastasia.yu.ac.kr/documents/Fumitaka_11_1.pdf www.JCEA-Online.net Open Access Publication Creative Commons License Deed Attribution-No Derivative Works 3.0 Journal of Contemporary Eastern Asia, Volume 11, No.1: 43-56 http://dx.doi.org/10.17477/jcea.2012.11.1.043 Economics Crisis and Response: Case Study of Malaysia’s Responses to Asian Financial Crisis Fumitaka Furuoka, Beatrice Lim, Catherine Jikunan and Lo May Chiun The paper chooses the “Asian Financial Crisis” as a case study to examine its impact on Malaysian economy and describes how Malaysian government responded to the crisis. It also focuses on the Asian financial crisis’ impact on the employment of banking sector in Malaysia. In the finance, insurance, real estate and business service sector, a number of 6,596 workers were retrenched. Banks were forced into mergers and acquisition as well as downsizing, trim lean, organizational changes and introduction of new technologies. Excess workers were offered a “voluntary separation scheme.” These retrenched workers became the urban poor facing high cost of living and no opportunity for jobs as there is no safety net provided. 1. Introduction...
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...we often hear about the term financial crisis. Every day on the news we can hear about the financial crisis in some countries and how they are trying to prevent it or to get out of it. Especially about the financial crisis in Greece. So what exactly is financial crisis? There have been a lot of definition of what financial crisis is, but they all agree in one thing financial crisis appears when some institution or assets suddenly lose a large part of their value. In the 19th and early 20th centuries, many financial crises were associated with banking panics, and many recessions coincided with these panics. Other situations that are often called financial crisis include stock market crashes and the bursting of other financial bubbles, currency crises and sovereign defaults. There a lot of types of financial crisis: banking crisis, speculative bubbles and crushes, wilder economic crisis and other crisis. But from all of them, today the most frequent financial crisis is the banking crisis. This happens when a lot of the depositors withdraw their deposits from the bank, causing the bank to bankrupt. This kind of crisis happened in 2007-2008,also known as the global financial crisis and 2008 financial crisis. This crisis is considered by many economists to be the worst financial crisis since the Great Depression. This crisis was called the worst because it was spreading really quickly all around the world. But what causes this kind of crisis to happen? There a lot of causes...
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... What were the origins of the Asian currency crisis? The Asian currency crisis was a period of financial crisis started in Thailand in July 1997. Many Asian countries experienced a financial crisis are a large drop in the value of its currency and a large drop in its traded equity prices. Before the crisis happened, many Asian countries produced a dramatic reduction in poverty and rapid economic growth. Behind the boom, there are lots of imbalances: large current account deficit was financed increasingly by short-term inflow; the real exchange rate had appreciated to an unsustainable level; and export growth had slowed obviously. Based on a literature review, a great deal of effort has been made to trying to understand the origins of the crisis. One view is that weaknesses in Asian financial systems were at the root of the crisis. The lack of incentives for effective risk management created by implicit or explicit government guarantees against financial failure caused the weaknesses. The large capital inflows, rapid economic growth and pegged exchange rates also accentuated the weaknesses of the financial sector. An alternative view is that there was not anything wrong with East Asian economies with historical good performance. The large capital inflows to finance productive investments made them vulnerable to a financial panic. The inadequate policy responses to the panic caused the financial crisis and the economic disruption (Sachs and Radelet 1998). What...
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...The Next Financial Crisis According to the Economic Times, a second Asian Financial Crisis is on its way. The two giants of Asia almost seem to be competing with one another to become the cause of the next global financial crisis. Between China and Japan, Japan will most likely trigger the crisis. Japan is inflating its money supply three times faster than the Fed’s QE program. It is weakening the yen as intended and exporting deflation to its customers, making them less competitive. According to Arabian Money, the sugar-rush effect is reflected in a booming Japanese stock market as profits from abroad will also now be higher in yen. However, devaluation in a highly indebted economy is loaded with danger. Japan has suffered from two decades of stagnation. It has the highest debt-to-GDP ratio of any major country, and a demographic crisis so acute that more adult diapers than baby diapers are sold. The government has appointed a new head of the central bank whose stated goal is to inflate the economy as a way of trying to encourage growth (Washington Times). For many reasons, it is doubtful that the new strategy will work. One can easily envision a scenario where the necessary rise in interest rates gets outside the control of the central bank. The Japanese trade deficit could widen further through March 2014 due to demand picking up ahead of the sales-tax increase. Financial crises come round every seven years on average. There was the stock market crash of 1987, the emerging...
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...Cyprus Since the financial crisis of 2007/2008 in the United States, there has been a worldwide domino effect resulting in negative consequences for the economies of a number of countries. The Dominion of Cyprus remained relatively unscathed immediately preceding this economic downturn with a contraction of the economy as result of decreased tourism. In 2011, however, as a result of haircuts upwards of 50% on the Greek bonds that Cypriot banks had heavily invested in, Cyprus was no longer able to support its financial sector and was forced to seek a bailout from the European Union. The proposed bailout plan for Cyprus was not only unexpected, but an action that had never before been done in the history of banking crises. This controversial “bail-in” plan has many serious implications for state of financial markets worldwide. The European Union agreed upon a bail-in plan in which bank deposits would be used to support the struggling Cypriot banks. Specifically, a levy of 9.9% on the savings of depositors with balances over 100,000, and 6.75% on depositors under 100,000 will be paid in return for equity in the banks. Nearly 6 billion euros would be saved from the European taxpayers while Cypriot government figured they could just “spread the pain” resulting in nearly 7% payments from the insured depositors. With this plan to pass, depositors not only in the European union, but around world would now fear the risk of a breach in the explicit promise that they can be...
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...In the years leading up to the crisis, high consumption and low savings rates in the U.S. contributed to significant amounts of foreign money flowing into the U.S. from fast-growing economies in Asia and oil-producing countries. This inflow of funds combined with low U.S. interest rates from 2002-2004 resulted in easy credit conditions, which fueled both housing and credit bubbles. Loans of various types (e.g., mortgage, credit card, and auto) were easy to obtain and consumers assumed an unprecedented debt load. As part of the housing and credit booms, the amount of financial agreements called mortgage-backed securities (MBS), which derive their value from mortgage payments and housing prices, greatly increased. Such financial innovation enabled institutions and investors around the world to invest in the U.S. housing market. As housing prices declined, major global financial institutions that had borrowed and invested heavily in subprime MBS reported significant losses. Defaults and losses on other loan types also increased significantly as the crisis expanded from the housing market to other parts of the economy. Total losses are estimated in the trillions of U.S. dollars globally. While the housing and credit bubbles built, a series of factors caused the financial system to become increasingly fragile. Policymakers did not recognize the increasingly important role played by financial institutions such as investment banks and hedge funds, also known as the shadow banking...
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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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...FINANIAL CRISIS 2008 AND CORPORATE GOVERNANCE The business world is questioning whether Corporate Governance has become a mere catchphrase, divorced from the contentious problems it is supposed to solve… MEMBERS: AYUSH KUMAR-030 NIPEKSH I MAHAJAN-082 PRABHAV MISHRA-0 PRATEEK KUMAR-096 VAIBHAV JAIN-164 “Why should a financial engineer be paid four, four times... to a hundred times more than the real engineer? A real engineer build bridges, a financial engineer build, build dreams. And when those dream turn out to be nightmares, other people pay for it.” - Andrew Sheng “Contrary to the vulgar belief that men are motivated primarily by materialistic considerations, we now see the capitalist system being discredited and destroyed all over the world, even though the system has given men the greatest material comforts” - Ayn Rand “In fact, there is ultimately a limit to how much regulation can do. In the final analysis, you could write all the rules you want, but there has to be a philosophy of ethical behaviour that comes from human beings operating in a professional way” – William H. Donaldson, CFA “The global crisis was caused by “the over-50s not knowing what the under-30’s were doing” – Johann Rupert, Remgro Chairman “The first casualty of a downturn is truth” - Financial Times Columnist 30 Sept 2008 Introduction- The banking crisis was triggered by largely unregulated trading of complex financial instruments, including mortgaged-backed...
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