The Global Finance Crisis: Impacts Of The Global Financial Crisis

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The financial crisis that occurred in 2007 to 2009, likewise known as the Global Financial Crisis or the Subprime Mortgage Crisis, has been considered by many economists to be the world’s worst financial crisis since the Great Depression in the 1930s.
The subprime mortgage crisis started off in the United States and the trigger of the crisis was the bursting of the housing bubble which peaked in around 2005 to 2006. This led to a large decline in home prices that had caused increased levels of mortgage defaults and foreclosures. The growth of such mortgage debts industry was financed with mortgage-backed securities (MBS) and collateralized debt obligations (CDO) which were greatly backed by credit worthy and reputable financial intermediaries.
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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. Nonetheless stock markets still plummeted worldwide. The downturn in the economic activities hence resulted in evictions, foreclosure of smaller banks and companies and prolonged unemployment worldwide.

Impacts in the United
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Despite huge amounts of injections of liquidity into the financial system by the European Central Bank and Federal reserves, banks began to horde cash and were unwilling to lend each other. This resulted in liquidity crisis and led to the first major bank failure in the United Kingdom in over 100 years when Northern Rock, which heavily depended on wholesale short term borrowing rather than deposits for its funding, collapsed in September 2007. Thereafter, a string of other European financial institutions failed as well. Ireland, which was seen as one of the most successful and wealthiest countries in Europe with very high economic growth prior to the financial crisis was hit particularly hard. The financial crisis in Ireland triggered a painful recession, amongst the worst in modern Irish history. Unemployment rate rose from 4.5% pre-crisis to 12.5%, while GDP levels plunged by more than

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