Discuss and analyse the recent global financial crisis and consequent credit crunch

Discuss and analyse the recent global financial crisis and consequent credit crunch Essay example
Masters
Essay
Finance & Accounting
Pages 7 (1757 words)
Download 0
Discussion and Analysis of the Recent Global Financial Crisis and the Consequent Credit Crunch Events Leading To the Global Financial Crisis There has been a considerable debate on the events that led to the global financial crisis. However, the genesis of the global financial-turned-down crisis can be linked to the combination of absence of proper regulations and worldwide financial excesses…

Introduction

Massive trade excesses in some nations, and deficit in trade in other nations and lastly, savings rates that were too high in some areas of the world and too low in others were also other events that led to the global financial crisis (Kirton, Oldani, and Savona 2011, p90). The recent global financial crisis events began on 9 August 2007. On that date, there was a seizure in the banking system, which was instigated by the BNP Paribas’ move, to cease its activities in three hedge funds that focused on US mortgage debt (Elliott 2011, p1). In 2008, credit markets in the Wall Street froze, and this indicated that credit crunch crisis was eminent. This affected everything in the financial markets (Szilagyi 2011, p18). Sustained low interest rates that began in 1999 up to 2004 made the adjustable-rate mortgages (ARMs) look very attractive to the potential buyers. The low interest rates were largely driven by the huge current deficit in the United States and other nations such as China who purchased the US Treasury bonds (Marshall 2009, p10). There is strong evidence that suggests that, in most parts of the United States, it had become very easy and cheap to get a subprime mortgage (Marshall 2009, p11). The upward rise in the house prices was as a result of the property speculations. ...
Download paper
Not exactly what you need?

Related papers

Critically evaluate the reasons for the recent global financial crisis
Washington Mutual which is currently the largest bank failure was purchased by J P Morgan Chase. The crisis can be traced to the failure of the real estate market due to subprime lending which saw the commercial and residential housing prices increase for a decade from 1990 (Freedman 2010). The Asian financial crisis of 1997-1998 saw the economies in Asia generate huge current account surpluses…
From financial crisis to global recovery
Despite the global economic turmoil, the global FDI inflows rose significantly by 17 percent in 2011 in most of the economies to $ 1.5 trillion. The FDI flows increased in major economic groupings such as developing economies, transition economies and developed economies. Developing and transition economies recorded $ 755 Billion FDI inflows that were driven mainly by robust investments…
The Recent Global Financial Crisis
The current study focuses on a discussion and analysis of the recent global financial crisis and the consequent credit crunch in an international financial perspective, including the events leading up to the crisis, the economic and financial consequences, as well as the government responses and lessons to be learnt. Events Leading to the Incidence of the Global Financial Crisis: The global crisis…
In the light of the global financial crisis, discuss how the remuneration of chief executives of banks should be determined.
In the U.S, for example, this was followed by acquisition of properties from defaulters. Despite a given financial situation, the banks’ chief executives have always enjoyed a constant pay through basic salaries and bonuses. Their positions have been secured by tenures and extensive pension plans. The banks have defended such payments as a way of protecting the interest of the bank by ensuring…
In the light of the global financial crisis, discuss how the remuneration of chief executives of banks should be determined.
There are also macroeconomic factors for the occurrence of the crisis that include practices in accounting and lack of transparency among others. It has also been observed that major risks or weaknesses related to financial crisis lay in the fact that financial crisis occurred due to certain pre-crisis situations which arrived in relation the supervision and regulation of various activities. A few…
In the light of the global financial crisis, discuss how the remuneration of chief executives of banks should be determined.
It was observed by several economists that for banks, one of the major reasons of not been able to survive during the financial crisis is the remuneration policies for the bank CEOs. Mcgarvey (2012) illustrates the fact that even in the era of financial instability of the world economy, salaries of CEOs is just climbing up without any adequate justification of such high salaries. This in-turn also…
The effect of the U.S. Subprime Crisis to the China commercial banks in 2008-2013
A careful analysis of the sub-prime crisis reveals that it was created from the slump in housing prices that created a ‘bubble’ of expectations among investors. By the end of third quarter of 2007, the prices of underlying assets declined drastically and the value of mortgage based securities was higher than asset. This motivated investors to default on mortgages as they felt that actual worth…