Global financial crisis essay

Global financial crisis essay

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Introduction

Paper Types. You are free to use it as an inspiration or a source for your own work. The global financial crisis that has been prolonged for a while now first instigated the showing of its impacts throughout the middle of and the beginnings of As a result, the losses of banks worldwide have exceeded the quantity of billion dollars. Politically speaking, this crisis has been caused by the democratic deficits around the world, causing a massive lack of hope and political interest in media among younger adults. In addition, the crisis has thrown stock markets into a recession some even crash. If this global financial crisis is not halted once and for all, individuals everywhere will be affected in terms of their livelihood. The individuals responsible for this such problem must take action and avoid bailing out in order to ensure a foundation for the future.

Thus far, multiple governments have proved successful in supporting various banking systems. This has been done by injecting new capital, affording warranties on new bank debt issuances, and the more recent onethrough asset relief schemes. Despite the fact that these three methods have excelled in bringing the banking system back to equilibrium, these kind of drastic measures take time, more than anything. Regardless, these kinds of implementations have been able to fortify the confidence of the banking system and have reduced grave risks.

This kind of support has been so corporeal that banks in European areas have been able to receive about billion euro of capital injection from a multitude of governments and approximately billion euro for funding warranties. In spite of the extended period of time that it takes for governments to implement these ideals into different governments, it is something that works and something that should be considered. If this policy option were to be undertaken, the global financial crisis would be reduced and the cycle would be prevented.

Vigorous policy efforts must be implemented in all kinds of economies so that world trade is able to be reinvigorated and so that financial capital can come to its equilibrium, global financial crisis essay. As a consequence, this global financial crisis essay would support emerging market economies and global growth, global financial crisis essay. In order to fix the crisis, individuals must be open-minded about reform. Reforming financial systems internationally would provide a unique insight into different kinds of economic necessities.

Reforming financial institutions such as the IMF and the World Bank would give new lenses to individuals and ultimately make them realize which countries require revitalization. Reform would without a doubt have to include heeding more attention to poor third-world countries. I say this because of the manner in which these poor countries often do not have the opportunity to state their opinion on how the global economy should be run. A reason that this reform is vital global financial crisis essay due to the fact that it has been proven time and again that whenever reform takes place, it is far too often in the favor of rich countries. Because of this, more attention must be placed on third-world countries. Papademos, Lucas.

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Get a Free E-Book! Global Financial Crisis, Essay Example. Pages: 3 Words: Essay. This Essay was written by one of our professional writers, global financial crisis essay. Need a custom Essay written for you? HIRE A WRITER! Background The global financial crisis that has been prolonged for a while now first instigated the showing of its impacts throughout the middle of and the beginnings of Policy Options Thus far, multiple governments have proved successful in supporting various banking systems. It is imperative that reforms such as listening to poor countries are able to lay the foundations for the future economic growth of all nations and sustained growth global financial crisis essay the ages.

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Trading relationships between the U. and China have come under severe pressure as a result of the global financial crisis. On a broader policy front, many argue that China has become overly dependent on the United States and that it needs to find alternative markets and trading partners. During the global financial crisis, China began to strengthen its trading relationships with other countries in Asia through the development of free trade agreements FTAs , which eliminate most or all tariffs between trading partners. Moreover, FTAs create trade among its members, but also divert trade from non-members.

If, for example, goods from Japan can enter China subject to zero tariffs, then U. imports, which are subject to normal tariffs, may be displaced by Japanese goods. China is leading efforts to create free trade areas in Asia and may even eventually help to create a Pan-Asia free trade area. China may also seek to establish an Asian Monetary Fund, one that can compete with the International Monetary Fund in providing loans to developing countries. China has therefore used the global financial crisis to strengthen its economic relationships with certain countries—i.

Of course, China has already established relationships with such a state. However, additional unwanted pressure from the United States to reform its currency policy and to remove subsidies from important state—owned enterprises might have pushed China into further expanding and deepening this particular relationship. In sum, China places much of the blame for precipitating the global financial crisis on the United States because the U. financial industry created the subprime mortgage problem. In other words, China believes that it and the rest of the world has been harmed by a financial crisis that is largely the doing of the United States. China is in a better position than many other countries to withstand the global financial crisis: its conservative and prudent fiscal policies placed an emphasis on saving and investing its earnings, rather than on consumption.

However, China now finds that its economic stimulus package, designed to alleviate the effects of the global financial crisis, might come under challenge by the United States and might be the subject of trade sanctions imposed by the United States. The package is designed as part of a shift to a model of economic growth that creates an important role for domestic consumption as a driver of growth and will further create a sustainable economic model for the foreseeable future. In April , FDI inflows to China were down by The United Stated hence took significant measures in order to shield its economy, firms, and citizens from the lasting effects of the global financial crisis. The U. Even if Chinese manufactured products were easily accessible to the U.

and relatively very affordable, the U. opted to safer its market and crumbling domestic firms and institutions at the expense of its existing trade relationship with China. Consequently, China incurred somewhat significant financial losses as its main export market: the United States reduced its volumes of trade. has proven to be a disadvantage in this particular instance. First, through a sharp decrease in the purchase of Chinese exports. Secondly, Foreign Direct Investment FDI has also tremendously decreased as a result of this policy carried out by the U. Foreign direct investment FDI refers to the injection of capital into China by foreign investors mainly multinational corporations. An example of FDI occurs when a U. company establishes a subsidiary in China for the purpose of conducting business in China.

First, many foreign-invested enterprises FIEs are engaged in exports of goods from China, helping China fuel its growing trade surplus with the United States. In order to establish these business entities, the U. Third, FDI also provides the crucial component of technology transfer. In most cases, the foreign investor will need to transfer or license its technology to the business entity in China in order for the business to operate successfully. The role of FDI is crucial to China because FDIs provide capital, thereby resulting in new construction projects and, more importantly, providing China with the access to advanced technology that is crucial to competitiveness in the modern world.

Consequently, a sharp decline in FDI from the United States to China will therefore severely jeopardize Chinese economic plans and damage its economy to some extent because of its dependence on FDI from the U. S and U. purchase of Chinses exports. Treasury, which also made large loans. The Treasury opted for the sound decision of injecting capital into financial institutions, thereby boosting their balance sheets more directly. In addition, the U. Although these programs were initially intended to last less than a year, they have been extended several times during the global financial crisis in an effort to mitigate the dire consequences of the crisis. This U. hence engaged in similar a neo-mercantilist policy by protecting domestic firms and their growth.

Although this was supposed to only last less than year—it rather created a dependency relationship between the U. financial institutions and the U. Federal Reserve. If such a policy was truly successful, then I would assume that there would be less reliance on the program implemented by the Federal Reserve. Some would argue that the U. Nonetheless, the dependency theory would probably emphasize how a these companies being bailed by the U. government and the Federal Reserve exploit the working American class. Regardless of the potentiality of such a claim, restoring the financial capabilities of U. domestic firms means an increase in employment. Lastly, the United States also issued an economic stimulus package.

Fiscal stimulus to directly increase aggregate demand was another key piece of the government response to the global financial crisis, both in the United States and in many other countries such as China. The evidence on the effect of the fiscal stimulus package is mixed, as many would suggest that it was far less important to addressing the financial crisis than were actions by central banks to provide liquidity and government recapitalization and guarantees of the financial system. First, as a basic matter of timing, most of the additional government stimulus package did not come on line until late and into While one can construct a theoretical argument that the expectation of the stimulus package helped to reassure financial markets, any direct effect of the stimulus on the financial crisis through the early months of was necessarily quite limited.

Even if the stimulus package did not come as soon as expected, the fact that it was speculated it was going to be implemented really helped strengthen confidence and the possibility of curbing the global financial crisis. Global Financial Crisis. com, Oct 14, Accessed January 7, com , Oct Order paper like this. Did you like this example? Type your requirements and get professional help. Deadline: 10 days left. Number of pages. Email Invalid email. A professional writer will make a clear, mistake-free paper for you! Stuck on ideas? Struggling with a concept? Get help with your assigment. Leave your email and we will send a sample to you. Email Send me the sample. This growth rate was largely driven by service sector. India was amongst the fastest growing economies of the world second to China.

The Indian growth story had got attention of the investors and entrepreneurs around the world. The GDP growth rate of 9. One can also attribute era of political stability in the country. This was mainly on back of decrease in exports and inflow of capital. With the global outlook on economic growth looking green, the GDP forecast for India is 6. Saving as proportion of GDP and capital formation has witnessed more or less a constant trend in 30s. But capital formation has always been greater than savings which indicated that savings have also been used from sources abroad. This is also an indicator of trust that foreign investors have on India and its growth story.

This describes the crucial importance of foreign capital for an economy like India. Foreign capital enters the economy through FDI and FII. The FDI can be described as long term and stable in nature, while the FII is short term and unstable. FII inflows in India have been very volatile which are hungry for reforms. FDI is stuck due to policy paralysis in the economy where key bills are pending. Take the recent case of FDI in multi brand retail- this is one of the most awaited reforms which could bring in much needed foreign capital which can help in bringing down current account deficit, increasing foreign exchange reserves and appreciation of rupee.

Another issue of FDI in pensions, insurance is also pending. The recent report on the panel of GAAR under the chairman ship of Dr. Parthasarthy Shome has many reasons to cheer from the point of view of foreign investors. Abolition of short term capital gains tax on listed securities which will increase incentive to invest directly in India and also treat investments from all countries as neutral. But it also recommended a hike in securities transaction tax STT. This move can cut margins of small retailers. QFIF Scheme: Allows eligible foreign investors to invest directly in India.

Earlier foreign investors would invest in India only through FII. Individual investors and trust can invest in India through this scheme. The investors have to KYC complaint to become eligible to invest in India. They need to get a PAN. The investors feel PAN is more of psychological barrier. In budget, FM had opened QFI window in MF. Our academic experts are ready and waiting to assist with any writing project you may have. From simple essay plans, through to full dissertations, you can guarantee we have a service perfectly matched to your needs. The responsibility to provide margin rests with the custodians.

Once the transaction is settled stock exchange release the margin of the custodians. Cash collateral is an issue because money is unproductively parked with no returns. Deficits are an indicator of health of an economy. For the last 3 years, the budget has announced disinvestment target of Rs. The actual figure is cr and cr For 5 months into FY13 so far no process has started. At present both the companies are trading at 52 week low. The programme has further hit a road block for opposition from Heavy industries, steel and power. They believe that govt will not get right market prices in current market scenarios. In addition, stake sales in NMDC, NALCO, NHPC, MIDL also. Current Account Deficit at 4. CAD has widened mainly because of crude oil and gold. India is largest importer of gold.

Now increase in demand for gold indicates investor preference for the yellow metal as a safe investment bet vis a vis other financial assets. The impact of financial crisis was felt through all channels- finance, real and more importantly confidence channel. Global investment dried up with a depreciating rupee; a clear signal of global risk aversion. Money and domestic credit markets came under pressure as domestic funds had to fill in the void left by external funds. Growth decreased due to agriculture and manufacturing and on expenditure side by private and government consumption as investment increased.

Productivity growth slackened as reflected by increase in incremental output capital ratio ICOR at 4. Inflation increased in post crisis years making RBI raise interest rates which further discouraged investment. Inflation with low growth had raised fears for stagflation. Part of the inflation was wage push as government spending on programmes like MGNREGA increased purchasing power of people. Government spending on subsidies on petroleum, fertilizers added to fiscal deficit of 5. Increased government borrowing pushed up interest rates which led to crowding out of private investment. To conclude, I would like to say that all is not so bad for India with its growth potential still intact. Finally it makes me wonder, after all the economic ills — are developed economies more prone to financial crisis.

Share this: Facebook Twitter Reddit LinkedIn WhatsApp Financial crisis occurs when the value of assets or financial institutions falls dramatically. Reference this Share this: Facebook Twitter Reddit LinkedIn WhatsApp The Global Financial Crisis GFC was caused by various factors which…. Below is a large selection of free economics essays for you to use.