Ty’Orrin Collins
Global Issues
Savannah State University
Abstract
In this essay, I will reflect on the global financial crisis. I will discuss the cause of the financial crisis, the affect the financial crisis had on the entire world, and the response to the financial crisis by the United States.
Keywords: Global Financial Liberalization, Fannie Mae, Freddie Mac, and Asian Financial Crisis
Financial Crisis Our nation has encountered a few financial crises throughout our history. One that we all may remember is the great depression. A financial crisis occurs when there is not enough money and credit moving through our nation.
Causes of the Global Financial Crisis There is not one specific reason …show more content…
This was a part of the global financial liberalization which opened up banks around the world to competition. Global liberalization was the cause of the Asian financial crisis in 1997 which started in Indonesia and spread to the rest of the world (pg.140). Many stock markets crashed and the economic growth reversed due to the Asian financial crisis. Because, of the previous financial crisis there were changes in technology to manage risk and make capital less expensive and more available (pg.142). Some of the inventions were securitization, derivatives, credit default swaps, collateralized debt obligations, hedge funds, and arbitrage. Usually bankers only gave out loans to individuals and companies they believed could repay the loan (pg. 143). However, these just increased the chance of the financial crisis. Another cause of the financial crisis was Subprime loans. Subprime loans generally refer credit to credit given to …show more content…
A lot of people lost their homes and jobs during this period of time. People where no longer able to afford to purchase homes, which meant that homebuilders were forced to abandon construction projects; this also impacted other people in the long run (pg.147). A lot of homes that were bought before this time period lost its values. The mortgage crisis inevitably spread to financial institutions, causing reputable Wall Street firms such as Lehman Brothers to collapse overnight (pg.147). There was also a shift in global power because of the global financial crisis. Most of the countries were negatively affected but some emerged stronger. BRIC countries Brazil, Russia, India, and China enhanced their world power (pg.148). Many other countries took The United States was one of the countries who suffered severely and where in need of a solution. A $787 billion stimulus package was passed by congress which was money allocated by the government to financial institutions and selected industries to prevent their collapse and reinvigorate economic growth. Other countries took a different approach in rebuilding which resulted in them to become a world