The IMF Response to the Global Financial Crisis in 2008

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The IMF Response to the Global Financial Crisis in 2008.
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The IMF Response to the Global Financial Crisis in 2008.
The international financial catastrophe of 2008 dramatically affected the International
Monetary Fund, moving it down to the center phase of worldwide financial control after a period
where it had lost lawfulness and significance. The beginning of the worldwide financial disaster
was the main test of the International Monetary Fund's significance and role in the international
economy and international economic governance. Before the disaster exploded in September
2008, most individuals suggested that the IMF was losing significance and credibility. Its rate of
lending was depreciating, and its staff was reducing. The calamity suddenly changed the IMF,
infiltrating it with new life and relevance as the centerpiece of worldwide economic governance
(Rodriguez, 2017). The G20 influencers looked up to the IMF to be a monetary firefighter and
agreed on a sudden increase of IMF loaning finances up to $750 billion. IMF finances had gotten
almost $1trillion by 2013. The organization moving back to the center phase in international
monetary governance at the onset of the worldwide monetary disaster was not the outcome of its
excellent pre-disaster conduct but the fact that IMF was the correct organization in the exact
place at the precise moment. Even after overseeing for more than a century state and worldwide
financial affairs, the main financial organization responsible for maintaining economic stability
worldwide, IMF was unable to forecast and control the worst disaster fully since the 1930s. The
paper will summarise the 2008 global crisis, the IMF response to the global crisis, various
scholars' argument about the international crisis, and the credibility of the IMF response to the
global crisis.
In September 2008, the international financial crisis blew up, caused by the downfall of the
Lehman Brothers, which shocked worldwide markets and started monetary panic as credit
markets seized up, leading to unemployment and economic disaster. A mortgage disaster

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originating in America changed into a full-blown catastrophe, which afterwards spread beyond
American borders, becoming an international economic disaster. The foundation of the
international calamity was in subprime covering credit disaster in America, itself led by
appreciating housing charges, apparently constant temporary interest charges, accessibility of
easy-to-get advances even for extreme risk debtors, and feeble controlling misunderstanding.
Mortgages were securitized, causing dangerous tools. When interest rates began appreciating,
individuals began defaulting on mortgages, the sale of houses depreciated, and the bubble busted.
Weak rules played a part in the breakdown. In America, there was no actual effort to solve the
housing fizz. The European central bankers did not respond to a flow in requesting loans. Global
wealth ratios for banks were also feeble. Banks could escape withholding nominal principal
aside. They were also skilful at shifting debt off-balance sheets or performing other imaginative
finances to enable them to carry on more loans. Lehman was the earliest and one of the biggest
investment banks in America, with 25000 workers and $600 billion assets. The subprime
mortgage disaster highly impacted it, and its stock had declined sharply in value throughout the
year. Its collapse was one of the biggest in history. The American treasury and federal reserve
decision to let Lehman collapse remains controversial because it did not hinder the financial
breakdown. Soon after, the fed extended a lot of money to support the sale of securities firm Bear
Stearns to JPMorgan Chase.
The subsequent "Great Recession" was the worst the universe had encountered since the 1930s
Great Depression and caused massive pressure on prevailing attempts to more international
economic authority. Capital flows were all drained, trade decreased dramatically, and the rate of
joblessness increased in the following months. The worldwide economic development of 1.9% in
2008 skimmed into a reduction of 2.1% the subsequent year, which signified the first

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deterioration over a couple of years (world bank, 2009). Main banks were in a bad state, with
some changed from speculation banks to bank holding organizations to endure or some absorbed
by other banks. The human effect was generally much bigger. Oil and food prices had by now
been in the center of a price increase by 2008, which was by then taking a peal on poverty-
stricken nations. The world bank expected that the collapse would drive over sixty million more
individuals into a risky shortage, which also suggestively enlarged the number of recurrently
hungry individuals. Top Fed economic expert approximated that if the American sustained along
its pre-calamity route, it would have generated a confounding $1 trillion extra in goods and
services every year. The disaster made all administrations painfully aware that mote unity was
required to readdress monetary practices and regulations to avoid a disaster from repeating itself
or revolving into something worse.
The IMF moved fast once the disaster hit to get money out of the door and help coordinate
international and regional initiatives. Once the international economy started to contract, nations
queued up for assistance from the IMF. Strauss-Kahn made it evident that he desired the IMF to
maintain conditionality for finances lessened to matters related to the catastrophe and lower
conditionality where possible. The fund used its emergency Financing strategy to give out help
in a fast procedure. Under the mechanism, the IMF board would loans fast, within 2-3 days after
the national administration and IMF had reached their agreement. Between mid-September and
November, the IMF approved loans to states like Georgia, Ukraine, Pakistan, Hungary, Iceland,
and Serbia. The latter was dramatic because it followed the collapse of Iceland's banking system.
It was the first time in thirty years, and a Western European nation had borrowed finances from
the IMF. Most of the IMF loans were followed by resources from the world bank and the EU.