global financial crisis

Introduction
The global financial crisis of the year 2008 was started in United States of America a scrawled its way throughout the world as world economies today stand to be highly globalised and all the countries depend on one another for their economic sustainability. The article below discusses the possible causes of the global financial crisis of 2008 and tries to answer the questions like whether global financial crisis could be repeated again. The discussion below ranges from the effects of financial crisis in today’s world and the loopholes in the international economy that could result in the repetition of the global financial crisis. The discussion finally ends in certain proposals as to how the financial crisis be mitigated.
Causes of global financial crisis (Davis, 2014)
The crisis popularly known as the global financial crisis began in the month of July in year 2007. The lack of faith in the mortgage properties of the United States investors started the panic attack which ultimately resulted in liquidity crunch leading to a crisis like situation. The investors rapidly began to withdraw money from the financial instruments further making a panicking situation even worse. The stock market crashed after this situation further worsening the situation even at the global level. This was further augmented by the burst of the house bubble. 
House bubble, also known as the subprime crisis was the crisis which was created when the owners of the houses who had mortgaged the homes to take loans found out that they were not able to pay the mortgage amount.  The banks then found out that the homes which they had taken as security were valued far less than the loan they had originally handed out to the takers. This essentially resulted in liquidity crunch for the banks putting the fear of banks shutting down. This resulted in closure of the largest American Bank the Lehman Brothers. 
Below is the diagrammatical presentation of the global financial crisis and the losses incurred during it (Shah, 2013)-
  
Looking closely at the reasons of global financial crisis, it could be said that the bursting of the house bubble was the reason for the triggering of the global financial crisis. 
If we look further as to why the financial crisis occurs at any point of time, there are certain common factors (Capital institute, (n.d.)). Some of them are listed below-
1.	Leverage- excess leverage whether to the investors or the lenders always causes trouble. The accounting for the leverage is not possible and when such leverage goes beyond the control of balance sheets, the crisis starts. 	
2.	Liquidity – the second reason is also like the first one. If the banks are lending the long term loans then the borrowings against such lending must be covered by the long term borrowings only. Problem starts when the borrowings become short term and are lend to the party on the long term basis. This creates a liquidity crunch situation for the banks. 
3.	Too big to fail- the industries have now become so large and so important for the sustainability of the economic welfare they needs to be managed very meticulously. For example, the banks must be operated at the decentralized level because the banks deal in trillions in volume data and the failing of one aspect of the bank must not bring down the cumulative effect of the crisis to all the entities. Decentralization will cause the banks to operate at a more independent level providing sufficient room for separate operations. 
4.	Conflict of interests – the banks in the process of satisfying the interests related parties may lead to creating a situation where they cater to only limited clients leading to a concentrated customer base relating to one industry which in turn will lead to collapse of the bank if the industry to which its customers relates also collapses. 
5.	Taxes and subsidies- the taxes and subsidies are important as they are responsible for the fund movement in the economy and if there is a crunch like situation then a bailout package must be given by the government to secure the economy. However, the taxes if possible must be relieved at the time of crisis so that the general population does not suffer much during that period of crunch.
6.	Governance- the governance of the country largely ensures that the economic conditions are clear and prevents the crisis. If this becomes loose, then the conditions may become out of control certain times.
Global financial crisis according to some reports could happen again. The logic behind this assumption is indeed quite simple. The global economy is developing and improving at a pace faster than the USA’s economy. The economies are linked to each other and the global economic development shall lead to a recession like situation again. The deflation in United States of America is again coming and as claimed in some reports, the condition of the US economy is in far worse shape. The global economic crisis is further stren 


Enjoy big discounts

Get 35% discount on your first order


We have made it easy for you to place an order

SEND YOUR ORDER DETAILS TO:

WHATSAPP: +1 (209) 260-9257

TWITTER: Our Twitter Page

EMAIL:[email protected]