Since hindsight offers perfect or a 20/20 vision, many people opined the US central bank failed in its task to promote healthy and sustainable economic growth for the country, and by extension of being a multi-trillion dollar economy, for the entire world. The advent of a global economy has made potential economic disruptions like bursting of asset bubbles a serious matter to contend with. Economists, politicians and policy makers now pay more attention to the formation of asset bubbles, how these start, how these bubbles could be prevented from growing bigger and what actions can be considered as appropriate if a bubble is clearly identified. It must be admitted that despite the experience of several prior asset bubbles, policy options are still woefully limited. Economists and academic theorists are conflicted on what responses are considered to be the most appropriate in such situations. The experience with asset bubbles is not fairly recent since the phenomena had existed since the middle Renaissance period. A frequently-used example was the so-called “tulip-mania” in 1634 up to 1637 in which a few special black tulips fetched the same price as a mansion! Although there are many types of asset bubbles, there is some agreement that bubbles are formed by two causes: the first cause is when financial intermediaries like banks, brokers, brokerage houses and even the central bank (by failing to act and is guilty by default) “pump” up the price of an asset or a particular asset class; the second cause is when a nation's financial institutions lend to people or groups who are politically connected. The US housing market is a good example of the first cause cited above in creating a bubble. Banks, mortgage lenders and mortgage brokers fed the frenzy by making obtaining a housing loan very easy, even to an extent of giving out mortgages to people who were imminently not qualified for a loan for the reason of not having adequate incomes to pay the monthly amortizations or even approving a loan to non-existent borrowers (bordering on outright fraud). The practice of American banks to originate and distribute (in contrast to other countries in which banks originate and hold) is seen as further hastening the expansion of the housing bubble. Some experts blame complex financial instruments known as derivatives as the prick that finally caused the bursting of the housing bubble; in particular, they liked to cite collateralised debt obligations (CDOs) as the culprit. CDOs were and still are risky investment instruments; these represented an ill-defined asset class, namely derivatives similar to options (puts and calls) and credit default swaps. The second cause is when large sums of monies are lent to people who are politically well connected in a form of financial cronyism. Although not very prevalent in the US and in other Western economies, such practice is contributory to asset bubbles because it results in the misallocation of scarce financial resources better invested elsewhere. Good examples are the Korean chaebols and the Japanese zaibatsu which are the equivalents of classic American business conglomerates. The bottom line is that cheap funds channelled to the conglomerates cause them to drive up the prices of their
Student's Name & Course No.: Professor's Name: Asset Bubbles (Should the Fed Intervene?) 12 March 2011 1. INTRODUCTION The current global recession has its origins in the housing mortgage meltdown of the United States that started in December 2007. Prior to that, specifically in the period between years 2000 to 2006, residential housing prices in the US almost doubled…
ude 32 35 12 Conclusion 35 37 The Importance of Play in Design Practice Introduction Designing in any field, whether it is architectural, graphic or product, requires a high level of creativity and imagination, along with a keen sense of aesthetics. These attributes cannot be imbibed in a person through education or training but the individual concerned, who aspires to pursue a career in designing, needs to have a natural flair for creative arts.
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When the economy of a country grows the real estate segment also grows because of high correlation between the two. Construction industry moves side by side. Constructions of not only buildings is required but also the construction of the accompanying infrastructure such as roads, bridges, flyovers, other civil engineering works, architectural products and so on has to be done.
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Garner for the very purpose of simplification and easier interpretation (Legal Information Institute, 2013). However, the amendments in linguistic style did not make significant alterations to the rules. Further, amendments to the FRCP in 2010
8). In this regard, Wacker (1998) argues that there are two conceptualizations of theory: “formal definition and operationalization” (p. 363). The operationalization of theory is linked to four main factors:
According to IMF, the property sector of HK symbolizes about 50% of the outstanding loans and if there is any sharp property price correction, and then it would result in another subprime mortgage crisis. HK property market is famous for its volatility
The method was first developed during the period of 80’s to signal the turning points in the economic activities. The basic way in which this functions is by using monthly index of industrial production as an indirect
The researcher claims that under LBJ’s regime, has been the center of much scholarly work. His policy on Latin America is of vital importance as it advocated an anti-communist stand, particularly when countries such as Cuba were holding anti-US sentiments at the time resulting in aid from the Soviets.
2 pages (500 words)Thesis
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