What Are The Causes Of Financial Crisis

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Understanding Financial Crisis: Causes, Effect and Prevent measure

To most ordinary people, Financial Crisis is a both familiar and unfamiliar topic. There is a range of definition of the Financial Crisis, but in general it is refers to the crisis of financial assets or financial markets or financial institutions. In fact, Financial Crisis is closely related to people’s life, 2007-2008 Global Financial Crisis attracted ordinary people to focus on the financial sector. This essay will argue the financial crisis of 2008 came from the US subprime crisis, which has brought enormous impact on the world economy, and in different societies, the countries have different prevent measures to cope with the crisis. For the aspect of cause, the US subprime
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For North America, as the birthplace of the financial crisis, America inevitably brought the disaster to the North Americas. According to media reports, US mortgage giants Freddie Mac and Fannie Mae are set to be put under government control, Merrill lynch acquired by the bank of America, the court adjudicated the bank of Lehman Brothers bankrupt. New York governor David Paterson (2008) said that now Wall Street is suffering from its worst ever period, about forty thousand employees may be unemployed because of enterprise bankruptcy. At the same time, Mexican President Calderon (2008) said with the spreading of the crisis to Mexico, the Mexican peso hit low against the US dollar, sank more than 12%. Furthermore, in Mexico, export, tourism, remittances income is the main source of income, but now these industry has been got hit hard. For Europe, the financial crisis led to the credit crunch. In the run-up to Christmas 2008, result from the employers has no enough money, many employees will not return to work until January 19 (Guardian newspaper, 2008). It can be seen, the British real economy faces severe challenges. Once the financial crisis severe abnormalities, affecting the scope is unprecedented, and even leads to bankruptcy in some countries, such as Iceland (IMF, 2011). The…show more content…
China and the US, as the world's biggest developing country and developed nation, used a variety of measure to prevent the financial crisis. To start with, as mentioned above, American governments’ great failure was the market superintends strength inadequacy. So regulators must accept responsibility for preventing the asset bubbles of financial markets(Mark Thomas, 2009). As consequence, the Obama government has issued a series of prevent measures. They announced plans to impose much more regulation and oversight on financial markets to reduce systemic risk and avoid the repeat of the financial disasters (Dan Robinson, 2009). In the spring of 2007, the US Treasury Secretary Henry Paulson called on re-examine the U.S. financial regulatory system, improve the market competitive. In the autumn of 2007, Mr. Paulson announced that the treasury department will design the financial regulatory reform. On March 31, 2008, the US Treasury published a 218-page of the U.S. financial regulatory system reform blueprint. In a sense, the U.S. financial regulatory system reform is the most meaningful and influential prevent measures of the U.S (Dan Robinson, 2009). Particularly, China is the only major economy that is likely to show significant growth this year (US News Weekly, 2008). The Chinese president, Hu Jintao, said at the summit of the Group of 20:“China has its own way to prevent the

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