2008 Global Financial Crisis

Introduction

A financial crisis is a period of monetary capital shortages where an individual, corporation or nation cannot get enough money to finance necessary spending. The world has seen a number of financial crises hit different regions of the world. Examples of these include the Mexican financial crisis, the Asian financial crisis of 1997 and the most recent global financial crisis of 2008. In all these crises, lessons are learnt. Economists try their best to analyze the crises so as to find their causes and make recommendations on how they can be evaded in future. However, it seems that financial crises in the modern globalized world are inevitable. Somehow, analysts miss the signs of impending danger and when they do, it is usually

These financial players regulate and avail funds to governments and banks for investment. In an article titled The Global Financial System published in the eJournal USA, Geist noted that though the idea of globalization and elimination of trade barriers was noble, it contributed immensely to the 2008 global financial crisis (Blyth, Gisst and Soros). Financial integration and the use of advanced information technologies expose an economy to financial crises. More so, financial integration means that an economy is likely to be affected by problems existing in other markets through the ripple effect. The use of advanced computer systems in global trade has made the flow of funds around the globe easy. In the 2008 financial crisis and the period before that, cash transfers and stock market trading happened so fast that regulating it was virtually impossible. For that reason, funds were easily transferred to regions with investment booms to finance demands created by increased consumption. This helped in creating current account and balance of trade deficits. Governments could not regulate spending to bring it in line with income generation. That way, the financial crisis was inevitable and was fuelled by regulatory weaknesses in the international financial

The most recommended strategy is to ensure more stringent regulation of the financial sector. Poor decisions prior to and during the financial crisis were common. For example, some financial institutions were given preferential treatment when the crisis struck through government bail outs while others were ignored. The crumbling of those, like the Lehman brothers, that were ignored made the crisis worse. Governments need to ensure that informed monetary and fiscal decisions are made. Bank lending and interest rates need to be regulated to prevent huge debt accumulation. Loans should be given in moderation while their interest rates should ensure controlled investment. They should encourage investors to analyze investment risks critically to ensure that only profitable investments are