2008 Financial Crisis Essay

1002 Words3 Pages
bulb-icon

Recommended: Financial crisis 2008 in housing

Financial Crisis Global economic crisis is popularly believed to have begun in July 2007 during the credit crunch. Loss of confidence among the U.S investors in the value of sub-prime mortgage was instrumental in causing liquidity crisis. It resulted in the U.S Federal Bank injecting capital into the financial markets. The situation had worsened by September 2008 and markets had crashed, and this raised a lot of concern. The housing market suffered greatly as home owners had taken sub-prime loans and they were unable to meet the mortgage repayments. Large number of borrowers defaulted loans and banks would be forced to repossess house and land which was much lower the original amount the banks had lent the borrowers. Banks had liquidity crisis and giving and obtaining loans became more difficult (Reinhart & Rogoff, 2009). The Housing collapse in the U.S is believed to trigger the global financial crisis but …show more content…

There is a common trend of market decline in U.S and abroad, and this creates fear that we may go back to the financial crisis (Edison, 2000). Fears of a second financial crisis within a decade have been catalyzed by the turbulence in markets. Share prices have fallen drastically, and slump in cost of oil has left crude oil trading above thirty dollars per barrel. The situation can get even worse as analysts point out as emerging market currencies are in free fall. The United States corporate sector is hardly crushed by an appreciation of the dollar (Mishkin, 2011). The economy of the United States is in a worse state than the country’s Central Bank as noted by the US Federal Reserve. There is massive credit expansion which is not a real economic activity. Central bankers have failed to learn the problems of the housing bubble that resulted to the financial crisis of 2008. The dollar has risen just like the Japanese yen in 1990s, which can have devastating

Show More
Related

  • The Financial Crisis of 2007-2008 and The Federal Reserve

    2612 Words  | 6 Pages

    The financial crisis of 2007–2008 is considered by many economists the worst financial crisis since the Great Depression of the 1930s. This crisis resulted in the threat of total collapse of large financial institutions, the bailout of banks by national governments, and downturns in stock markets around the world. The crisis led to a series of events including: the 2008–2012 global recessions and the European sovereign-debt crisis. The reasons of this financial crisis are argued by economists. The performance of the Federal Reserve becomes a focal point in this argument.

    Read More

  • Essay On The October Crisis

    526 Words  | 2 Pages

    The October Crisis was one of the most memorable defining moments in Canadian history in the 1960s, and it truly tested the length in which Pierre Trudeau would go to stop these terrorist attacks. The October Crisis followed the various violent acts committed by the Front de Libération du Québec who wished for Quebec independence; mailboxes were placed with bombs, and the Montreal Stock Exchange was bombed in 1969. The October Crisis began on October 5, 1970, where James Cross, a British trade commissioner, was kidnapped by the FLQ. In exchange for the safe return of Cross, ransoms were demanded for the FLQ. While the government worked in trying to rescue him, Pierre Laporte, a cabinet minister for Quebec, was captured five days later. On October 15, 1970, the first time the War Measures Act was used during peacetime occurred; Premier Robert Bourassa and Trudeau decided it was necessary in stopping this possible terrorist threat. 450 suspects were arrested by police, most being released right after. Meanwhile, Laporte had been murdered and stuffed in the trunk of a car; this ended most public support for the FLQ and soon the threat of terrorists diminished. Eventually, Cross was discovered and he was

    Read More

  • The Federal Reserve Bank and the Decline of the U.S. Economy

    3522 Words  | 8 Pages

    There is perhaps no other political issue in our contemporary society that is more pertinent, pervasive, and encompassing than a nation’s economy. From the first coins used in Greece and the Asia Minor in the 7th century BCE, to the earliest uses of paper money, history has proven time and time again that the control of a region’s economy is absolutely crucial to maintaining social stability and prosperity. Yet, for over a century scholars have continued to speculate why the United States, one of the world’s strongest and most influential countries, has one of the most unstable economies. Although the causes of this economic instability can be attributed to multiple factors, nearly all economists agree that they have a common ancestor: the Federal Reserve Bank – the official central bank of the United States. Throughout the course of this paper, I will attempt to determine whether or not there is a causal relationship between the Federal Reserve Bank’s monetary policies and the decline of the U.S. economy. I will do this through a brief analysis of the history and role of this institution, in addition to the central banking system in general. In turn, I will argue that the reckless and intentional manipulation of the economy by the Federal Reserve Bank, through inflation and the abolishment of the gold standard, has led to the current economic crisis in the United States.

    Read More

  • The Mexican Peso Crisis

    1589 Words  | 4 Pages

    Federal funds rate has risen the fifth time in 1994 on Nov 1994 and reaches 5.5%. This resulted in stronger dollar against peso as the quantity of US dollar reduced. This signaled problems for Mex...

    Read More

  • Canada Housing Market Essay

    1252 Words  | 3 Pages

    “The housing market will get worse before it gets better” –James Wilson. The collapse of the United States housing market in in 2008 was one of the most devastating moments for the world economy. The United Sates being arguably the most important and powerful nation in the world really brought everyone down with this event. Canada was very lucky, thanks to good planning and proper preventatives to avoid what happened to the United States. There were many precursor events that occurred that showed a distinct path that led to the collapse of the housing market. People were buying house way out of their range because of low interest rates, the banks seemingly easily giving out massive loans and banks betting against the housing market. There were

    Read More

  • The Great Recession

    670 Words  | 2 Pages

    It can be argued that the economic hardships of the great recession began when interest rates were lowered by the Federal Reserve. This caused a bubble in the housing market. Housing prices plummeted, home prices plummeted, then thousands of borrowers could no longer afford to pay on their loans (Koba, 2011). The bubble forced banks to give out homes loans with unreasonably high risk rates. The response of the banks caused a decline in the amount of houses purchased and “a crisis involving mortgage loans and the financial securities built on them” (McConnell, 2012 p.479). The effect on the economy was catastrophic and caused a “pandemic” of foreclosures that effected tens of thousands home owners across the U.S. (Scaliger, 2013). The debt burden eventually became unsustainable and the U.S. crisis deepened as the long-term effect on bank loans would affect not only the housing market, but also the job market.

    Read More

  • National Debt Essay

    1380 Words  | 3 Pages

    The national debt surfaced after the revolution when the United States government had to borrow funds from the French government and from the Dutch bankers. By 1790, the U.S. government accumulated millions in debt, but no one knew precisely how much. The Constitution mandated that the new government take over the debts of the old government under the Articles of Confederation.

    Read More

  • The 2008 Economic Recession

    1050 Words  | 3 Pages

    subprime mortgages were major factors of the collapse of the 2007-2009 economy collapse. All of America suffered from the 2008 recession.

    Read More

  • The Myth Of The Student Loan Crisis Essay

    1256 Words  | 3 Pages

    Many Americans are seeking an ideal presidential candidate for our next election; furthermore, many college students seek a candidate that has their best interest in mind, leading many to focus on Bernie Sanders and his ideas for an affordable education system. In the article, The Myth of the Student Loan Crisis, Nicole Allan and Derek Thomas focus the article on the risky investments of college and questioning the rising debt levels as a national crisis. While Allan and Davis claim the risk of college and mention rising debt levels as a national crisis; however, Allan and Davis use charts to support their stance while avoiding the issues Americans need to focus on, such as the rising cost of college, “justifiable debt”, and the cost of those not contributing to society.

    Read More

  • The Great Recession Essay

    1080 Words  | 3 Pages

    What caused the Great Recession that lasted from December 2007 to June 2009 in the United States? The United States a country with abundance of resources from jobs, education, money and power went from one day of economic balance to the next suffering major dimensions crisis. According to the Economic Policy Institute, it all began in 2007 from the credit crisis, which resulted in an 8 trillion dollar housing bubble (n.d.). This said by Economist analysts to attributed to the collapse in the United States. Even today, strong debates continue over major issues caused by the Great Recession in part over the accommodative federal monetary and fiscal policy (Economic Policy Institute, 2013). The Great Recession of 2007 – 2009 enlarges the longest financial crisis since the Great Depression of 1929 – 1932 that damaged the economy.

    Read More

  • Summary: The 2008 Financial Crisis

    886 Words  | 2 Pages

    The financial crisis occurred in 2008, where the world economy experienced the most dangerous crisis ever since the Great Depression of the 1930s. It started in 2007 when the home prices in the U.S. Dropped significantly, spreading very quickly, initially to the financial sector of the U.S. and subsequently to the financial markets in other countries.

    Read More

  • 2008 Financial Crisis Essay

    1536 Words  | 4 Pages

    (Murphy, 2008) The US banking sector was first hit with a crisis amongst liquidity and declining world stock markets as well. The subprime mortgage crisis was characterized by a decrease within the housing market due to excessive individuals and corporate debt along with risky lending and borrowing practices. Over time, the market apparently began displaying more weaknesses as the global financial system was being affected. With this being said, this brings into question who is actually to blame for this financial fiasco.

    Read More

  • The Cause and Effect of the Subprime Mortgage Crisis

    1310 Words  | 3 Pages

    In late 2005, the housing bubble burst, and housing began to decline in price. People who refinanced, particularly those who financed with variable interest rates, suddenly found their homes were valued at much less. The housing market became flooded with homes for sale, because the homeowners with variable rates and interest only loans could not continue to make their payments. Greenspan: The rise in the number of homes for sale caused further lowering of home values. Keep in mind that the main reason for the mortgage crisis is the high number of defaulted home loans, which triggered foreclosures and sell-offs.

    Read More

  • Ffinacialization and the Housing Market

    638 Words  | 2 Pages

    The housing market crash was a response to a chain of businesses and people who believed that the old laws of banking were no longer important. Banks were no longer required to hold on to mortgages for 30 years which gave them the ability to sell off to other companies, without concern for the mortgage holders. David Harvey, a renowned geographer, warned us of this problem, stating that “labor markets and consumption function more as an outcome of search for financial solutions to the crisis-tendencies of capitalism, rather than the other way around. This would imply that the financial system has achieved a degree of autonomy from real production unprecedented in capitalism’s history, carrying capitalism into an era of equally unprecedented dangers” (Coe, Kelly, and Yeung, 2013)

    Read More

  • The Great Depression Essay

    1508 Words  | 4 Pages

    In turn everything in the present and the future is judged through the stocks as they hold a high importance in industrialized economies showing the healthiness of said countries economy. As investing discourages consumer spending over all decreases, it lead...

    Read More

More about 2008 Financial Crisis Essay

Open Document