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Today's Crisis - 2009 vs. 2007 Crisis - Essay Example

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Today's Crisis - 2009 vs. 2007 Crisis

Some of the biggest financial companies of the world, including Lehman Brothers and Merrill Lynch, have collapsed completely during this time (Savona et al., 2011, p.295). The crisis situation involves large number of aspects from restructuring of financial markets to that of economic policies across the globe (Kent et al., 2011, p.128). This decline has caused the decline in the financial as well as monetary system of countries across the globe. The financial crisis of 2009 has been a continuation of the financial crisis of 2007. This crisis has occurred because of the failure of world financial system to cope up with the growing level of demand for different goods and services and capital accumulation. This fact has been accelerated by the fact that during this time the rate of unemployment across the globe has reached a very high level (Poole, n.d., p.442). This paper is aimed at providing an analytical perspective of the crises situations. Global effects: The world economy has been facing a 30% risk of entering into the depression. This figure has been coined according to the “Economist Intelligence Unit”. The London consultancy has defined the fact that an economic or a financial depression as growth or development process in the developed as well as developing world averaging lower than 1% per year between the time period of 2009 and 2013. There has been a 60% chance that the fiscal as well as monetary policies now being implemented will stabilise the world economy by the next year that it said. "Deflation would be characterised as mass bankruptcies and job losses," the London consultancy argued. A third situation in which lessening assurance in the US directs to the dollar getting dumped contains a 10% probability, it argued. The “International Monetary Fund” observes the global economy contracting 2012 for the very first time since times of “Second World War”. The “Economist Intelligence Unit” has estimated 95 nations are at "high" or at "very high" risk of economic or financial unrest (World 'faces 30% risk of depression', 2009). Several banks across the country have failed or collapsed due to the prevalence of the financial crisis situation. These banks have been acquired by other banks or financial corporations. Hence, the negative effects have been exposed to the level of customer confidence on the banking and financial system of the country (Failed Bank List, 2012). The profundity of the financial and economic recession as well as widespread deflation has suggested the fact that nominal monetary policy rates are required to fall into negative region in order to supply sufficient incentive, which is impossible. Theoretically, in the equilibrium, the cost of acquired capital in respect to the aggregate economy must roughly be comparable to the rate of growth of nominal GDP. This is used as the substitute for the rate of capital return in respect to the aggregate economy). Both these policy rates as well as the rates of growth of GDP values have been reduced during this time of deep financial recession across the globe (A World Of Credit Easing, 2009). Also the creation of large number of tent cities across the US has revealed the severity of the crises situations which have been outcomes of greater level of job losses and loss of houses. These tent cities have been found in New York and in New Jersey to a great extent (USA tent 'cities' on rise as US economy crumbles (23Dec11).flv, 2012). Effects on UAE: The emerging market (EM) nations in the “Middle East and North Africa” (MENA) region (which also incorporates UAE and all other GCC nations) have been comparatively insulated from the effect of the crisis ...Show more
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Summary

The financial crisis of the period 2007 and 2008 has been an outcome of credit crunch and liquidity crisis mainly in the United States. This crisis has been generated in the United States at the beginning and then it spread through the entire World…
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