Impact of Global Financial Crisis - DOC

Added on - 06 Jun 2020

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Global Financial Crisis
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1Global financial Crisis.................................................................................................................1Great depression 1929.................................................................................................................1Sub Prime Mortgage crisis..........................................................................................................2Effects of GFC over financial markets........................................................................................2Possible causes of Financial Crisis.............................................................................................3Chances of repeating global financial crisis in future.................................................................9CONCLUSION................................................................................................................................9REFERENCES..............................................................................................................................10
INTRODUCTIONThe impacts of global financial crisis over the various large economies throughout theworld. It has promoted the effects over increase in the credits, debts or liabilities of the nations.Therefore, it as affected various countries directly of indirectly with economic variations. Therehas been loss of United States investors in the sub-prime mortgage which has caused liquiditycrisis. Banks facilitated more loans, borrowings and drawings to the citizens which has provokedthe competition among them. In context with such competitive environment they have startedfacilitating loans on lower interest rates. Here, various countries has the indirect impacts of theGFC which is on the basis of their dependency over the large economy in terms of tradepractices. These are mainly relevant with the oil and petroleum agreements among such nations.The countries who has directs impact of GFC are USA, UK and various European countries,While the nation who has indirect impacts of this economic crisis are Nepal, Bhutan and variousAsian countries.Global financial CrisisThe initiation of this economic crisis in the year 2007 as the sub prime mortgage marketsin various nations like US and UK on housing and mortgage loan has promoted the financialcrisis mostly in the banking sectors. In order to meet the competition of the presenting loans,borrowing as well as attracting the large numbers of consumers. The banks from these nations hasstarted presenting the loans and advances on the large scale and with the lower interest rates. Itwas helpful for the sometimes as people were having adequate funds to have investments or toexpend the business area (Yoo, Choi and Pae, 2017). Therefore, after some period the banks hasleft with no money, no reserves and not any financial backups. These in turn affects in leading thevarious individuals and corporations to bankrupts. It has brought the economic downturn andrecession in the economy.Great depression 1929This economic depression was started on 24thOctober 1929 when 12.9 million of sharesor marketable securities were sold in a single day by the traders which was Trice the usual valueof transactions held in a day. This financial stroke has lead the nations with almost 10 years. Thesurvival of nations with the various economic obstacles such as unemployment, rise in the pricesof products and services, rise in interest rates as well as poor economic conditions. In US the1
depression has affect employment opportunities to the youth that there is no job for the peoplebecause the organisations are suffering from big losses which has reduced the trade practicesamong them (The Great Depression: What Happened, What Caused It, How It Ended,2017).There has been increment in the unemployment rate to 25% in the year 1933. Therefore, in theseregards it has negatively affected as reduction in the GDP rate of the nation from 130m to 55m.The impacts of Global Financial crisis over Indonesia in the period 1930 there has beenreducing in the GDP rate for about 83% it has affected various small scale industries in tradepractices. Therefore, it can be said that the impacts of such economical issue has abandoned thegrowth in the country. The nation has survived these period till 1949 with the economic struggles(Growth Collapses in Indonesia: A Comparison of the 1930s and the 1990s,2017). Thegovernment has made plans to stabilise the economic conditions with managing the per capitaincome as well as provoking the domestic production more than comparison with the externalcountries which is a revolutionary step that helps them in making the adequate changes in theeconomic environment of the nation.Sub Prime Mortgage crisisIn accordance with such economical causes here the government has granted the loans andadvances to the people who are comparatively not able to make the repayment of theirborrowings (Lane and Milesi-Ferretti, 2017). Therefore, during the period of global financialcrisis these was the main reason for no financial backups in the banks and in the governmentalreserves. These financial institutions have facilitated the citizens with excessive amount of loanswith less return or less interest covered. Thus, it has reflected in the deficit in the current accountsof the governmental reserves.Effects of GFC over financial marketsThe influence of these financial crisis over the stock market that there is reduction in thelong – terms finances and investments made by the people in this concern. It has brought the riskin the economy had reciprocally affected the small size enterprises in terms of performance,efficiency and investments. Every nation was tends to maintain their currency value, reducing thenumbers of imports as well as trying to control the monetary transactions in the economy (Howdid the global financial crisis affect long-term finance?,2017). Therefore, there has been variouspolicies and rules and regulations were made which has helped the nations to resolve theeconomical variations.2
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