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Financial Crisis - Research Paper Example
Author : marielle19
Finance & Accounting
Pages 9 (2259 words)
Financial Crisis Name University Introduction The global financial crisis has substantially damaged the global economy. The year of 2007 brought the emergence of the global financial crisis. Many experts call it a recession as it has substantially diminished the GDP, real income, industrial production, employment and so on…
During the period of late 1990s and the early years of 2000s, a considerable number of developing countries had deposited their savings in the investment and commercial banks of the United States of America. This provided a supplementary liquidity in America. The banks and other financial institutions had more funds than the avenues for the investment. The excessive liquidity convinced many financial institutions and banks to extend lending even to the individuals and institutions that did not have a favourable credit history. The attacks of 9/11 also contributed its part. Soon after the attacks of 9/11, the Federal Reserve found it reasonable to decrease the interest rates as it would motivate consumer confidence and increase consumer spending as well. In the subsequent parts of this paper, definition of recession is provided. Subsequent to that, the causes of global financial crisis segment have been included. It is followed by the portion encompassing the effects of the global financial crisis. Before the conclusion part, lessons from the global financial crisis have also been provided. Definition Roland Reagan once said that recession is when your neighbor loses his job and depression is when you lose your job (Eslake, 2008). ...