What is the global financial crisis, and who is it a crisis for?
What is the global financial crisis, and who is it a crisis for?
1.0 Introduction
The global financial crisis broke out in 2008 was most serious since the 1930s, it deeply affected various aspects and brought significant losses. Analyzing what is the global financial crisis, and who it is the crisis for has a important practical significance.
2.0 Causes
Reasons for the outbreak of the global financial crisis are reflected in the following aspects.
2.1 Real estate bubble
The global financial crisis ultimately triggered by the U.S. subprime crisis arising from the burst of the real estate bubble in 2008, and the birth of the real estate bubble is not only related to the "consumption culture" of American society, but also directly connected with the improper real estate and financial policies, as well as the long-term maintenance of accommodative monetary environment in the U.S. Monetary expansion and low interest rate environment reduce borrowing costs, prompting American people to swarm into the real estate field. When cyclical downturn of the economy began, interest rate increased, house prices fell, the bubble was shattered, default rates of low credit class first of all increased significantly, which led to the subprime crisis (Crotty, 2009).
2.2 Defects in financial regulation
Before eruption of the crisis, there are nearly 10 departments or organizations which are in charge of financial regulation, including the federal and state governments, the Federal Reserve Board (FRB), Office of Comptroller of Currency (OCC), Office of Thrift Supervision (OTS), Federal Deposit Insurance Corporation (FDIC), Securities and Exchange Commission (SEC), and so on. Admittedly, the regulatory regime was a solid foundation for the development and prosperity of the American financial industry. However, with the development of financial globalization and financial innovation, the drawbacks of the U.S. financial regulatory system gradually reflected, and eventually
1.0 Introduction
The global financial crisis broke out in 2008 was most serious since the 1930s, it deeply affected various aspects and brought significant losses. Analyzing what is the global financial crisis, and who it is the crisis for has a important practical significance.
2.0 Causes
Reasons for the outbreak of the global financial crisis are reflected in the following aspects.
2.1 Real estate bubble
The global financial crisis ultimately triggered by the U.S. subprime crisis arising from the burst of the real estate bubble in 2008, and the birth of the real estate bubble is not only related to the "consumption culture" of American society, but also directly connected with the improper real estate and financial policies, as well as the long-term maintenance of accommodative monetary environment in the U.S. Monetary expansion and low interest rate environment reduce borrowing costs, prompting American people to swarm into the real estate field. When cyclical downturn of the economy began, interest rate increased, house prices fell, the bubble was shattered, default rates of low credit class first of all increased significantly, which led to the subprime crisis (Crotty, 2009).
2.2 Defects in financial regulation
Before eruption of the crisis, there are nearly 10 departments or organizations which are in charge of financial regulation, including the federal and state governments, the Federal Reserve Board (FRB), Office of Comptroller of Currency (OCC), Office of Thrift Supervision (OTS), Federal Deposit Insurance Corporation (FDIC), Securities and Exchange Commission (SEC), and so on. Admittedly, the regulatory regime was a solid foundation for the development and prosperity of the American financial industry. However, with the development of financial globalization and financial innovation, the drawbacks of the U.S. financial regulatory system gradually reflected, and eventually
References: Barrell, R., Hurst, I. and Kirby, S. (2008). Financial crises, regulation and growth. National Institute Economic Review, 10(206), 56 - 65. Boyer, R. (2012). The four fallacies of contemporary austerity policies: the lost Keynesian legacy. Cambridge Journal of Economics, 36, 283 - 312. Crotty, J. (2009). Structural causes of the global financial crisis: a critical assessment of the ‘new financial architecture’. Cambridge Journal of Economics, 33, 563 - 580. Gezici, A. (2010). Distributional consequences of financial crises: evidence from recent crises. Review of Radical Political Economics, 42, 373 - 380. Jing, R. (2012). The collapse speed of China 's exports in the 2008-2009 financial crisis. CESifo Economic Studies, 12(58), 650 - 670. Milberg, W. (2009). Shifting sources and uses of profits: sustaining US financialization with global value chains. Economy and Society, 37(3),420 – 451. Montgomerie, J. and Young, B. (2011). Home is where the hardship is. Gender and wealth (Dis) accumulation in the subprime boom. CRESC Working Papers, 79, 2 -19. Subacchi, P. (2008). New power centres and new power brokers: are they shaping a new economic order? International Affairs, 84 (3), 485 - 498.