Will Global Financial Crisis Repeat?

The assignment explores the likelihood of a repeat of the 2008 Global Financial Crisis, considering historical precedents, debt levels, and market conditions. It discusses how the current economic situation may differ from the past and concludes that while there are some chances of a similar crisis, it will likely be distinct in nature. The analysis also touches on the importance of learning from past experiences to prevent or mitigate such crises in the future.

Global Financial Crisis

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Possible causes of the financial crisis.....................................................................................1
Scale and mipact of global financial crisis.............................................................................3
REFERENCES................................................................................................................................6

INTRODUCTION
Global Financial Crisis is the most crucial word which make world to think differently.
However, this can be said that financial emergency does not arise in just recent years. But this
came up to 1929 which incorporated the great depression. Great depression was terrible globally.
Financial depression emerged at the time of 1930s, which emerges in the US. The Great
depression changed throughout nations; in of the nations it introduced in 1929 and that was
going to 1941. This was the longest depression of 20th century. In 21st century, the great
depression is regularly implemented as an example of how far the global economy could
emerged.
Possible causes of the financial crisis
The depression begin in US later on a great fall in the prices of stock that started around
1929 in September , and became global information with the crash of stock market in October
between 1923 and 1932, global GDP fall down by a forecasted to 15%. By compare, global GDP
reduce by 1 percent between 2008 to 2009 during depression. However, this can be said that
most of the countries were trying to recover by mid 1930s. Although, in most of the nations,
adverse effects of great depression were continue to be gone till world war second (Global
Financial Crisis, 2017).
That depression devastated the poor and developed economy very badly, and US had the
major adverse impacts as personal income, profits and prices fell down during global trade
dropped out by more than 50%. Unemployment rate was rose to 25% in the US and this was rose
to 33%.
The GFC is considered as worst global financial crisis which was occurred due to
deregulation in the financial industry. It freezes the loaning among various banks and another
financial institutions need to be saved. This is some kind of situation under which values of
assets and other financial institution decreases on a fast speed. Financial crisis is something
which is relate with fear or operate a bank in which all customers and investors sold their assets
and withdraw all the money from their saving accounts. They do this with the expectations that if
they will remain at financial institutions the this will fall down the value of their assets. Financial
crisis is something which take place when assets are overvalued and it can be change due to
irrational behaviour of investor. These financial crises give rise to a recession in economy. All
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these global crises affect every industry of world. Banks have demanded more mortgages to
support the profitable sales of these derivatives. Australian dollar also depreciated rapidly. Many
experts observed that it would create less impact on the Australian economy than other countries.
The Rudd government announced that it would guarantee bank deposits. In order to control such
financial crisis the government should focus on designing regulations that will help in
encouraging responsibility and a long term outlook. The government should also restore
customers and investor confidence.
IMF, World Bank and different multilateral corporations identified economic and
financial crises based on their own initiative. During similar time, G-20 resolutions likewise
added drive. Opposite to this, heads of these institutions were not unwilling to call instantly on
heads of G-20 state for fast and deeply investigated act. They can access the summits just like as
investigator.
Main concerns covered on one hand counselling of individual nations and financial assist
that is to be enhanced. At the end, every financing corporation had to importantly improves their
equipments. Such kind of procedure does not accomplished by autumn 2009. At the same time,
financial crisis enhanced pressure on reforming governance. Although, resistance of some
industrialised nations remaining more; nevertheless, reform is required to be accomplished in
2010.
Both IMF and World Bank implement spring and autumn meetings to current their
measures and activities in a most effective manner (Moshirian, 2011).
A financial crisis is a situation in which the normal value of assets gets decreased due to change
in present market trends. The money related problems that took place in year 2007-2008 are
called as global crisis as it effected the economy of whole world. There are a number of reasons
behind why these issues take place among which the most common one are discussed below:
 Market instability – The business surroundings are dynamic in nature and due to the
fluctuations in current trends the function of market gets disturbs which further effect the
productivity. Change in the credit facilities effected the economy to a great extent as the
purchasing power of market got effected and hence lead to financial Crisis.
 Greed – The desire to get rich among the homeowners also contributed in the growth of
financial crisis. Unfair practices like selling and buying of property illegally rise the
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prices to a great extent in the real estate which adversely effected financial state of
country.
 A broken international monitory system – This is one of the most under appreciated
reason behind the crisis that took place. Exports and import activities in between the
developing and developed countries were not maintained which resulted into great loss of
currencies. According to the financial market and the reasons observed behind the
financial crisis it can be said that these global issues can be repeated as due to
globalisation more international trade is done which is difficult to manage (Lardy and
Subramanian, 2011). Henceforth, a financial crisis is a kind of situation under which few
financial assets all sudden lose a high part of their usual value. In 19th and 20th Centuries,
so many financial Crisis were linked with banking panics, and most recessions coexist
with these panics. Other conditions which are normally called financial Crisis directly
stock market crashes and the bursting of other financial bubbles, currency emergency and
sovereign debts. Financial crisis emerge in a fall of paper wealth but do not essentially
results in importance variance in the real economy. The Great depression was began of
the Great Depression to destructively collapsed of US stock market prices on October 29,
1929, recognised as Black Tuesday. Although, few dispute this conclusion and oversee
the stock crash as a symptom, instead of a cause, of Great Depression.
Scale and impact of global financial crisis
There is huge impact of Global Financial Crisis on the economies of different countries.
This will have impact on underdeveloped, developing and developed countries. The major
impact of GFC is on developed countries like UK. They have to face many consequences due to
GFC on the economic growth of UK. There are large number of effects are happen on the
business operations of different companies. There are many reforms are taken to reduce the
effect of GFC by IMF and preparation of G8 to G20 to reduce their impact. There are many steps
are taken by UN convention also.
The major impact of GFC on economies of different countries are define below:
 Underdeveloped countries: This includes the countries from east Africa like Ghana,
Cuba etc. But they faced less amount of impact as compared to developing and developed
nations. This will reduce the economic and social development of these countries
(Marazzi, 2011).
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 Developing countries: For developing countries, UN economic commission for Asia and
the Pacific has recognised that there is high chance of instability but in actual it will have
minimal effect on the growth of developing nations. IMF said that GFC is weakening the
growth of such nations and creates the large number of risk of inflation. After such crisis,
borrowing from the broad also becomes more expensive and investors have to take more
risk while make investment and made them more conscious. IMF and World Bank said
this will downgraded the growth of Asia, Latin America and above all Africa. High
growth rates are disappeared and shrinking the economic production. This will also
affects the industrial growth in such nations.
 Developed countries: The main effect which is happen of GFC is on developed
countries. The UK is also one of the developed country which have to face this impact.
Large number of big industries are working in UK which affects their capabilities of
financing their activities. GFC also have major impact on the sinking of per capita
income, deficits in trade, payment balances, dwindling currency reserves, currency
devaluations, increasing rates of inflation, higher indebtedness and public budget deficits
(Boddy, 2011).
Global Economic crisis in the most of the financial centres in the developed nations. The
force of impact on the developing and the transition nations become apparent. Situation is new;
earlier crisis dispersed from the developing nations. This was the time when developing nations
are the victims of crisis, but they did not cause it. The main root behind global financial crisis are
to identify the financial and economic policies of developed nations. Developed nations are not
accountable for it, but they are affected genuinely. However, crisis did not influence all regions,
nations and population groups equally on similar time scale. The patterns emerged separately for
each nation. On the other way, transmission channel pattern are clear. Industrialised nations
economic crisis dispersed on the developing nations through financial flows and trade.
At the time of global financial crisis, there was an instant fall in the demand for products
and services. Due to financial crisis the borrowing became more expensive and investors has
become more risk-conscious. Regression in economic growth entailed a sinking per capita
income mostly in countries where the population growth rates are high (Fratzscher, 2012). It also
make a direct impact on the living conditions of the populations. Investors also lost their
confidence in the stock market and consumer also faces shortage of cash due to which they are
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unable to spend more. It make negatively impact on world economy as a whole. The crisis did
not impact all regions, countries and population in the same manner. The financial and economic
crisis of the industrialists states spread to the developing countries primarily via financial flows
and through trade
Will it happen again?
According to Mark Twain, there may be a less chance of arising same financial crisis
situation arise in 2008 but it will arise in different to Global financial crisis. History may replete
with bubbles so it essentially required for whole country to learn the chapter from the past. Often
the seeds for all fresh globule are sown in the ashes of the latter Fortuitous in the post-GFC
situation seen so far there has been an deficiency of wide based globule on the standard of the
tech boom or Australia housing/credit boom (Peters and et. al., 2012). Elactronic-commerce
framework like Facebook and amazon are a prospect but they have seen obscurity near the
increase or endless PEs seen in the late 1990s tech boom. Nevertheless just because worldwide
debt has adult to a fresh high doesn't means a situation is upon us. It has been direction up for
decennary, much of the development in debt in formulated state post the GFC has been in public
debt and debt involvement are low thanks to low interest rates in agreement to the pre-GFC
period. Moreover, the other gestural of extra that usually set the area for abeyance and related
deep bear marketplace in shares like that seen in the GFC are not avialable on a general basis just
now. Furthermore financial correct have demanding importantly with banks which is needed to
have high capital quantitative relation and source of lesser publicity of assets from their investor.
So, there is some chances of arising such financial crisis situation but it will likely be
very different to GFC and many more of the signs of excess that normally precede deep bear
markets are still absent.
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REFERENCES
Books and Journals
Peters, G.P. And et. al., 2012. Rapid growth in CO2 emissions after the 2008-2009 global
financial crisis. Nature Climate Change, 2(1), pp.2-4.
Fratzscher, M., 2012. Capital flows, push versus pull factors and the global financial crisis.
Journal of International Economics, 88(2), pp.341-356.
Boddy, C.R., 2011. The corporate psychopaths theory of the global financial crisis. In Corporate
Psychopaths (pp. 163-166). Palgrave Macmillan UK.
Marazzi, C., 2011. The violence of financial capitalism. MIT Press Books, 1.
Lardy, N.R. and Subramanian, A., 2011. Sustaining China's economic growth after the global
financial crisis. Peterson Institute.
Moshirian, F., 2011. The global financial crisis and the evolution of markets, institutions and
regulation. Journal of Banking & Finance, 35(3), pp.502-511.
Online
Global Financial Crisis. 2017.[Online]. Available through: <https://www.canstar.com.au/home-
loans/global-financial-crisis>.
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