MSc International Business
8 November , 2014
2008 Financial Crisis
Bank failures, billions of dollars soared, global growth lowered, impotent governments. Financial
capitalism is in crisis.Media loop line numbers of the crisis, the stock market falls, the huge losses
of some banks without necessarily really explain What is happening in simple terms. But what are
the reasons of the global financial crisis? . And could it prevent ? The main cause of the crisis is the
collapse of the US mortgage market. About four years ago the banks and the US government began
to give a lot of loans for the purchase of property, financial liberalization occurred.
In its report on the world economy, the International Monetary Fund does not mince words and
defines the economic crisis of recent months (in 2008) as "the worst since the 1930s." The Fund
describes a global economy slowing down, at a pace that many experts consider the edge of
recession because of the most dangerous financial shock in advanced economies from the thirties.
For many years, central banks have proposed rates' extremely low interest pushing many people
into debt for the 'purchase of the house of' car, etc ( Ouarda ,2010).
Suddenly, in a few months, the bankers have begun to raise interest rates to put into serious
difficulties that many families, especially in the US, have not been able to pay the installments of
their mortgage and so they lost the property purchased . Many people have found themselves
suddenly poor, the salary was suddenly insufficient for their needs, even basic ones, and so the
'economy began to "turn" less. Less money and fewer purchases in a short time they sent in crisis
many companies have been forced to close or lay off workers due to lack of orders.
In general it is argued that the crisis started because of collapse of the subprime mortgages in the
US. But what is a subprime mortgage and how it can create a financial crisis ?
The current crisis is often compared to that of 1929-32 in the United States or to the Japanese
crisis in the 1990s, however, many aspects differentiate. Between 1929-32 the crisis began with a
stock market crash, which led to the bankruptcy of banks lent heavily to stock market speculators,
leading to a significant decline in credit and a severe economic depression. The absence of deposit
insurance and the lack of unemployment insurance were probably reinforced the negative
cumulative process by destroying the purchasing power of households. Little concern to the central
bank for liquidity in the banking system contributed to the bankruptcy chain of commercial banks.
Similarly, inappropriate economic policy measures such as protectionist policies and competitive
devaluations had disrupted the functioning of the global economic system, thus spreading the crisis
in the world. The Japanese crisis has against a national character.The collapse of real estate prices
and stock prices greatly inflated had led many...