Essay on The Global Financial Crisis ( Hereinafter The Crisis )

1573 Words Oct 27th, 2016 7 Pages
The Global Financial Crisis (hereinafter the Crisis) has been the most significant financial disaster of the twenty-first century thus far. With hindsight, it is possible to isolate the causes of the crisis and so be able to gauge the responses of political thinkers. As the most severe financial crisis since the Great Depression, it was natural that the political responses of the time would be both highly important and highly controversial.

In order to understand the causes of the crisis, one must first understand the progression of the crisis itself. Although there were undoubtedly a multitude of underlying causes over the preceding decades, the most obvious warning sign for the upcoming Crisis occurred on 9 August 2007 when BNP Paribas, a large investment bank, ceased trading in hedge funds due to their awareness of “dodgy derivatives”. This lead to the near eradication of short term interbank lending over the next month, however the still increasing asset prices maintained consumer confidence and so delayed the true start by more than a year. The most commonly regarded starting point of the crisis was the September 2008 collapse of Lehman Brothers, resulting in massively and suddenly reduced consumer and investor confidence. From this, there was a domino effect through first the American and then the global financial markets with a subsequent chain of bank failures commonly believed to have been only prevented by significant state intervention. By 2009, there had been…

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