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).
With a globalized system, a credit crunch can cause a ripple effect in the entire economy and very quickly turning a global financial crisis into a global economic crisis. The subprime mortgage crisis led to the failure and closure of large financial institution one of which was the collapse of Lehman Brothers in September 2008. This sent a wave of fears around the world in the financial markets. Large projects were called off, corporate sector stopped borrowing due to high interest rates, trade credit was impossible to attain, with falling demand, particularly for investment goods and manufacturing durables such as automobiles, trade volume collapsed. The crisis had threatened the collapse of many other large financial institutions but was prevented by the bailout of banks by national governments.
This asset liability mismatch made thrifts vulnerable to the costs of high interest rates. With increasing inflation, competitive pressure and the high interest rates that thrift institutions had to pay, huge losses were incurred in early 1980s. Net worth of the entire industry approached zero, falling from 5.3 percent of assets in 1980s to 0.5 percent in 1982. DEFINING FEATURES OF THE CRISIS:- The S&L crisis of the 1980s was undoubtedly a failure of public policy and historically high interest rate. Financial deregulation transformed the character of the thrift industry.
They are the account deficits in the US vice versa account surpluses in the rest of the world and also the absence of efficient risk premiums in the financial sector. After the dot-com bust and September 11 incident, the US Fed eased out on the monetary policy by decreasing interest rates and maintaining them at low levels for an extended period, driving an increase in consumption and investment. In the long run, it will eventually cause the subprime mortgage crisis. The weak credit markets lowered economic opportunities and a decrease in consumer spending that led to a drop in world trade and industrial production. Nations saw a “harmonized” downturn.
Continual increase in taxes has an effect of rabidly increasing the cost of loan, hence a deterrent factor to borrowers which would translate to financial crisis. Subsidies on the other hand has a positive effect on the borrowing ability, huge loan would then be taken by the public which would later affect the liquidity of the banks where there is a huge borrowing in relation to deposits. An example of a world financial crisis is the one that occurred globally in the year 2007-2008 which is considered by many economists that it was the worst kind of financial crisis ever experienced globally. It threatened the collapse of the large financial which was curbed by bailouts of banks by national government. (C.M.
Introduction The Global Financial Crisis is widely regarded as the worst financial crisis to have hit the world since the end of the Great Depression. The crisis had worldwide effects as rates of unemployment escalated, stock markets dropped while collapse of giant multinational enterprises was only saved by national governments bailouts. Since its peak in 2007-2008, analysts have embarked on establishing the key factors behind the crisis with varying causes put forward. This paper seeks to discuss these key factors by relating them to competing economic theories. By looking at the available literatures on the area, the paper will analyze how economists have tried to identify them in empirical research.
The second is fierce competition in banking enforced business strategies in order to hold loan growth and encounter funding need. Third is that shocking news from financial market instability affected negatively the economy and the banking system. In these years, while so many financial services company
The currency mismatches had also happened in Malaysia, with the exchange control regime requiring approvals for foreign currency borrowing. Several prominent corporations were allowed to raise foreign currency loans, although they only had ringgit cash flows. Due to the sharp ringgit depreciation, these corporations were faced with massive foreign exchange losses or insolvencies because of their currency mismatches and inabilities to hedge exposures. Moreover, the banking system in Malaysia was very risky and this caused bad macroeconomics. It was an explosive mix for any corporate entity which had over-borrowed and assumed too much maturity period or currency mismatches.
Introduction: China’s reputation on the world stage, at least from the perspective of the West, has been intimidating as of late. Its growing physical and economic presence, as well as its label as a communist country, have caused decades of Western politicians to hyperbolize its trajectory into a sort of political domination. Although the speed of economic growth has slowed down for China, it is still a source of confusion and controversy because of its complicated political standing. As the country introduces a free market into a communist country, often by establishing specific zones to ease the transition and keep it regulated, China is introduced to a sort of political flux. In times of transition, rules become less clear, and corruption
But if she is injured, it may cost me hundreds of thousands of yuan.” (Zhang, 2011). The idolatry that the Chinese shower upon money may be due to the major changes in the economy. From 1978, China began to move from a purely centrally-planned economy