...Chinese Economics in Global Financial Crisis of 2008 Prepared for F.S. Helmut Submitted January 10th, 2014 Ludacris Yu As for the financial crisis of 2008 in the world, which is the most serious economics crisis since the Great depression in 1930s, and caused globalized influenced. Many major economics have had flat and passive development over the last two years. Whereas in China, the economics still have been growing stabilized. According to the Wikipedia “China is the world’s second largest economy by nominal GDP and by purchasing power charity after the United States of America. And it is the world’s fastest-growing major economy with growth rates averaging 10% over the past several years.[1]” The financial crisis also mean a financial storm. The meaning of storm that are the financial indexes such as short-term interest rates, monetary assets, securities, real estate, land prices, the number of business bankruptcy and the collapse of several financial institutions suddenly or short-period deteriorated in the largest number of countries and regions. The financial crisis can be divided into a currency crisis, debt crisis, banking crisis or others. The economic crisis in the year of 2008 was originated in the U.S. Sub-prime mortgage crisis, the development of the U.S. Sub-prime mortgage crisis, which evolved into a global financial crisis. In my opinion, the crisis in 2008 which began to emerge in the second half of 2007, after the U.S. sub-prime...
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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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...2008 FINANCIAL CRISIS Name Course Date 1. Background The financial crisis commenced in August 2007 after the preceding inflation. The crisis became more defined throughout 2007 and gained momentum in 2008. This took place even after the financial regulators and the central banks’ tireless attempts to tame the situation. It is alleged that the main factors that influenced its manifestation include corruption, fraud, speculation, greed, bankers and bankers’ bonuses. However, the academic discourse, politics or media has been unable to solve the mystery surrounding the main causes of the crisis[1]. The mystery is academically relevant to the world of research just like the Great Depression, whose causes are still being discussed. Other sources believe that the crisis might have been as a cause of human failures especially following the refusal to bail out the Investment Bank Lehman Brothers. The housing bubble was the immediate trigger of the 2008 financial crisis. The following were the triggers under the housing bubble. I. Subprime lending A subprime mortgage is the mortgage that is readily acceptable without imposing strict measures of standard on it. Before the 2008 financial crisis, there existed a fierce competition between mortgage lenders. The competition between the mortgage lenders ensued from the struggle for market share and revenue. It also took place in tandem with limited supply of creditworthy borrowers which put unconditional stress...
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...2008 FINANCIAL CRISIS Name Course Date 1. Background The financial crisis commenced in August 2007 after the preceding inflation. The crisis became more defined throughout 2007 and gained momentum in 2008. This took place even after the financial regulators and the central banks’ tireless attempts to tame the situation. It is alleged that the main factors that influenced its manifestation include corruption, fraud, speculation, greed, bankers and bankers’ bonuses. However, the academic discourse, politics or media has been unable to solve the mystery surrounding the main causes of the crisis[1]. The mystery is academically relevant to the world of research just like the Great Depression, whose causes are still being discussed. Other sources believe that the crisis might have been as a cause of human failures especially following the refusal to bail out the Investment Bank Lehman Brothers. The housing bubble was the immediate trigger of the 2008 financial crisis. The following were the triggers under the housing bubble. I. Subprime lending A subprime mortgage is the mortgage that is readily acceptable without imposing strict measures of standard on it. Before the 2008 financial crisis, there existed a fierce competition between mortgage lenders. The competition between the mortgage lenders ensued from the struggle for market share and revenue. It also took place in tandem with limited supply of creditworthy borrowers which put unconditional stress...
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...Global Financial Crisis: The 2007–2012 global financial crisis, also known as the Global Financial Crisis (GFC), late-2000s financial crisis or the second "Great Recession", is considered by many economists to be the worst financial crisis since the Great Depression of the 1930s.[1] It resulted in the collapse of large financial institutions, the bailout of banks by national governments and downturns in stock markets around the world. In many areas, the housing market also suffered, resulting in numerous evictions, foreclosures and prolonged unemployment. It contributed to the failure of key businesses, declines in consumer wealth estimated in trillions of US dollars, and a significant decline in economic activity, leading to a severeglobal economic recession in 2008.[2] The financial crisis was triggered by a complex interplay of valuation and liquidity problems in the United States banking system in 2008.[3][4] The bursting of the U.S. housing bubble, which peaked in 2007, caused the values of securities tied to U.S. real estate pricing to plummet, damaging financial institutions globally.[5][6] Questions regarding bank solvency, declines in credit availability and damaged investor confidence had an impact on global stock markets, where securities suffered large losses during 2008 and early 2009. Economies worldwide slowed during this period, as credit tightened and international trade declined.[7] Governments and central banks responded with unprecedented fiscal stimulus...
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...Current Financial Crisis: a review of some of the consequences, policy actions and recent trends1 By Sameer Khatiwada and Emily McGirr, International Institute for Labour Studies2 What is happening? On the heels of the near bankruptcy of a major insurance company and the effective end of all major US investment banks, financial markets around the world sustained severe losses in the first two weeks of October, 2008, accelerating the downward trend that started at the beginning of the year. As a consequence, from New York to Moscow, and London to Sao Paulo, equity prices have fallen sharply – with the major stock indices of the G7 and BRICs losing nearly half of their value since the beginning of the year. This has seriously damaged banks’ balance sheets and restricted their lending capacity. With the cost of short-term credit rising dramatically and liquidity drying up, these events have been dubbed the worst financial meltdown since the Great Depression in 1930s. More importantly, the shock waves from the US financial market have spread throughout the globe, with many countries on the brink of recession (see Figure 1, Appendix). How did a “house fire” in America turn into a global banking crisis? Sub-prime mortgages are a financial innovation designed to provide home ownership opportunities to borrowers in the U.S. with a higher risk profile (such as borrowers with low incomes, bad credit histories or limited disposable income). Most of the sub-prime ...
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...INTRODUCTIONS The Global Financial Crisis of 2008 is considered by many economists to be the worst financial crisis since the Great Depression of the 1930s. It resulted in the threat of total collapse of large financial institutions, the bailout of small and big banks by national governments, and downturns in stock markets around the world. In United States, the housing market also suffered, resulting in evictions, foreclosures and prolonged unemployment. The crisis played a significant role in the failure of key businesses, declines in consumer confidence, declines in consumer wealth estimated in trillions of US dollars, and a downturn in economic activity leading to the 2008–2012 global recession and contributing to the European sovereign-debt crisis. The bursting of the U.S. housing bubble, which peaked in 2006, caused the values of securities tied to U.S. real estate pricing to plummet, damaging financial institutions globally. Economies worldwide slowed during this period, as credit tightened and international trade declined. Governments and central banks responded with unprecedented fiscal stimulus, monetary policy expansion and institutional bailouts. In the U.S., Congress passed the American Recovery and Reinvestment Act of 2009. In the EU, the UK responded with austerity measures of spending cuts and tax increases. Causes of Financial Crises Subprime lending During a period of intense competition between mortgage lenders for revenue and market...
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...Report On Global Financial Crisis: Recovery and Challenges “In the perspective of United States of America” Course Details: Fin603: Financial Institutions & Market Section: 01 Submitted to: Dr. Salehuddin Ahmed Professor BRAC Business School BRAC University Submitted by: Group- 5 |SL. |Name |ID No. |Signature | |1 |Mohammad Ishtiaque Hossain |14164090 | | |2 |Kazi Golam Faisal |14364071 | | |3 |Nurshia Jahan |13264009 | | Submission Date: November 17, 2015 LETTER OF TRANSMITTAL November 17, 2015 Dr. Salehuddin Ahmed Professor BRAC Business School BRAC University Subject: Submission of the report paper on ‘Global Financial Crisis: Recovery and Challenges’ Dear Sir, I hereby submitting the final version of the term paper on behalf of my group on ‘Global Financial Crisis: Recovery and Challenges’ that you asked us to submit on November 17, 2015 as our report paper. The paper is a part of the course Fin 603: Financial Institutions & Market under MBA program. The main purpose of this paper was to determine the theoretical aspects of global financial crisis and recovery and challenges...
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...1.Introduction This essay is based on the financial crisis from 2007 to 2008, which discuss whether the time at that moment is different. Here, we focus on the financial crisis happened in USA around these two particular years, therefore we mainly talk about ‘U.S Sub-prime Crisis’. Section I is to summarize the ideas that Reinhart and Rogoff provide according the book ‘This Time is Different: Eight Centuries of Financial Folly’ (2011) and their working papers. Section II is to evaluate and counter critically toward their argument. Also, a conclusion will be drawn after these two sections. 2.Section I The basic idea that Carmen M. Reinhart and Kenneth S. Rogoff suggests is that what happened in 2007 and 2008 was nothing different from previous financial crisis. They consider financial crisis can be traced by past experience from different countries around the world as usual. Their book and working papers introduce massive historical database which have constructed to study the debt (both external and internal), banking crisis, inflation, currency crashes and so forth. There are sixty-six countries included in the data, such as Africa, Asia, Europe, Latin America, North America, and Oceania (Reinhart and Rogoff, 2008). They studied various types of financial crises, however, the book mainly includes sovereign defaults and banking crises as these two forms of crises are particularly relevant to modern society. They covered government debt defaults in eight centuries...
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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...
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...IMF STAFF POSITION NOTE December 22, 2009 SPN/09/29 Global Imbalances: In Midstream? Olivier Blanchard and Gian Maria Milesi-Ferretti I N T E R N A T I O N A L M O N E T A R Y F U N D INTERNATIONAL MONETARY FUND Research Department Global Imbalances: In Midstream? Prepared by Olivier Blanchard and Gian Maria Milesi-Ferretti1 Authorized for Distribution by Olivier Blanchard December 22, 2009 Disclaimer: The views expressed herein are those of the author(s) and should not be attributed to the IMF, its Executive Board, or its management. Before the crisis, there were strong arguments for reducing global imbalances. As a result of the crisis, there have been significant changes in saving and investment patterns across the world and imbalances have narrowed considerably. Does this mean that imbalances are a problem of the past? Hardly. The paper argues that there is an urgent need to implement policy changes to address the remaining domestic and international distortions that are a key cause of imbalances. Failure to do so could result in the world economy being stuck in “midstream,” threatening the sustainability of the recovery. JEL Classification Numbers: E21, E22, F32, F33, F36, F41 Keywords: Current account deficits, saving, investment, portfolio choice. Authors’ E-mail Addresses: oblanchard@imf.org ; gmilesiferretti@imf.org 1 One of the series of “Seoul papers” on current macro and financial issues. We are grateful to Caroline Atkinson...
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...Banking Academy | City University of Seattle | CORPORATE FINANCE THE GLOBAL FINANCIAL CRISIS 2008 Group’s member:Nguyễn Như Nam (C)Phan Thu AnNguyễn Thùy DungHoàng Bá SơnNgô Thị Ánh TuyếtDate: 28/11/2014 | AbstractIn 2008 the world was fell into the worst financial crisis since the Great Depression of 1929-1933. Although this crisis has gone, however, its consequences for the economy of many countries is very serious, even now many nations are still struggling to escape difficulty. Just in a short period, the crisis originating from America has spread to all continents. It led to a series of serious consequences such as the falling in stock markets, increasing in unemployment rates, large financial institutions had been collapsed or bought out, and governments in many strong countries had to come up with rescue packages to bail out their financial systems. So why does it have tremendous destructive power? What are its causes and its development? What are the consequence it bring to the world? And what are the lessons drawn from this terrible event? Derived from these questions above, this paper will generalize about the global financial crisis 2008. | Table of Contents Abstract i 1. Background 1 2. Reasons 2 2.1 The housing bubble 2 2.2 Fed had lower interest rates for a long time. 2 2.3 The subprime boom 3 2.4 Securitization (MBS, CDO) and Credit default swaps (CDSs) 3 2.5 The credit rating companies. 5 2.6 Structured investment vehicle...
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...assessment of current economic activity, financial markets, and the monetary policy tools used to promote economic activity and preserve price stability. 1. Describe the Federal Reserve’s assessment of the current economic activity and financial markets. 2. Explain the Federal Reserve’s current view about inflation. 3. Describe the monetary policy tools the Federal Reserve uses to stabilize the economy and maintain price stability. 4. Based on the information you researched from Federal Reserve publications, present and justify your own economic outlook for the next 12 to 18 months. Introduction American economy is composed of financial balance of services, Agricultural, manufacturing and banking industry. In the result U.S one of the biggest global economy which comprises of foreign investments and movement of wealth in trade. From past many years the U.S economy is emerged more as service based and industrial base economy than farming based. This result the banking system to be more complex to deal with the government and currency , instituting the regulations and a centralized bank to regulate and from a policies which could limitize the negative effect on the general economic health on the country. In this paper I will analyze the Federal Reserve Banking System in U.S.A and the Federal Reserve’s assessment of the current economic activity and financial markets. its current view about increasing inflations . Current economic activity : Recently...
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...Table of Content Introduction.................................................................................. 1.0 Impacts Of Credit Crunch On U.S........................................ 1.1 Impact on U.S Economy...................................................... 1.2 Impact on Interest Rates...................................................... 1.3 Impact on Banking Sector.................................................... 1.4 Impact on Mortgages and Credit Lending Agencies............ 1.5 Impact on GDP..................................................................... 1.6 Impact on Inflation................................................................ 1.7 Impact on Employment in U.S.............................................. 2.0 Implemented Strategies To Overcome The Impacts............ 2.1 Fiscal Policy............................................................................ 2.2 Seek Direct Foreign Investment............................................. 2.3 Establish Proper Monitoring System...................................... 2.4 Strengthening the Country’s Internal Infrastructure............... Conclusion...................................................................................... References...................................................................................... INTRODUCTION “An immediate or sharp condition of unavailability of liquid money from the banks...
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...Introduction The U.S. economy is currently experiencing its worst crisis since the Great Depression. The crisis started in the home mortgage market, especially the market for so-called “subprime” mortgages, and is now spreading beyond subprime to prime mortgages, commercial real estate, corporate junk bonds, and other forms of debt. Total losses of U.S. banks could reach as high as one-third of the total bank capital. The crisis has led to a sharp reduction in bank lending, which in turn is causing a severe recession in the U.S. economy. This article analyzes the underlying causes of the current crisis, estimates how bad the crisis is likely to be, and discusses the government economic policies pursued so far (by both the Fed and Congress) to deal with the crisis. Housing Bubble Homeownership, (realtors) argue, is a way to achieve the American dream, save on taxes, and earn a solid investment return all at the same time. It's now clear that people who chose renting over buying in the last two years made the right move. In much of the country, recent homebuyers have faced higher monthly costs than renters, and have lost money on their investment in the meantime. Today, many homeowners are in up side down mortgages, meaning the purchasers owe more on their homes than what it is actually worth. In countless cases, it can be said that money has been thrown away, an insult once reserved for renters. Throughout the bubble period there was little if any mention...
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