Global Economic Crisis Thesis Statement

Portes claims that “the underlying problem in international finance over the past decade has been global imbalances, not greed, poor incentive structures, or weak financial regulation, however egregious and important these may be.” (2). Geneva: International Center for Monetary and Banking Studies, 2007. According to him, the global imbalances lead to “the increasing in dispersion of current account”, which “puts a burden on financial systems to intermediate.” In 1996, the US current account and emerging market plus developing country current account were each about zero. Right now, the global economic is recovering, but the study of reasons of the crisis still teaches many countries a lesson on how to build a solid financial system and how to deal with other macroeconomic problems.

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The shock to the global economy from this commodity price boom was as big as the first oil shock in the 1970s. For example, “the United States on net supplies financial assets and the emerging market countries demand them” (Ferguson et al. Fast growing countries with inability in creating sufficient financial instruments become dependent on the saving instruments from developed country such as America.

This was showed as a potential risk in the 1997-8 Asian economic crisis that the crisis contributed to the United States account deficit, reduced the global real interest rates, and boosted the America’s share of assets in global portfolios.

Because its consequences have a very big impact to the whole world, many economists and scientist have tried to find the causes of the crisis; and some major causes have been emphasized are greed, the defection of the free market system, and the lack of prudent regulation and supervision.

This essay will focus on the global imbalances, one of the most important causes of the current economic crisis.

Successive cause a domino effect on the solvency and liquidity of financial institutions in these countries, among others, led to the bankruptcy of hundreds of banks, securities firms, mutual funds, pension funds and insurance.

The crisis then spread to parts of Asia, especially countries such as Japan, Korea, China, Singapore, Hongkong, Malaysia, Thailand, including Indonesia, which happens to have long had the letters beharga these companies. government also announced a decline in the value of real GDP for part III in 2008 amounted to 0.3%.From the various critiques by experts, that the problem is Lehman Brothers announced a gradual loss before finally bankrupt. dollars in part-to-three in 2008 (10 September) and culminate in the announcement of bankruptcy on September 15, 2008. Likewise, also in Europe, the banking crisis in Europe was marked by problems at a small bank in the UK, namely Northern Rock Bank, in mid-2007.On June 16, 2008, the company announced losses worth 2.8 billion dollars for the second half of 2008. Similar unrest was also experienced almost simultaneously by Merryl Linch, Citigroup, AIG and other large financial institutions. unemployment rate rose to 6.7% in line with the increase in pessimism among consumers and investors throughout the period from September to November 2008. Northern Rock is a true small-scale private bank in the UK.Many researchers have pointed out that the global imbalances In general, the developing and developed countries together make a financial ecosystem that when a member problem, the whole system will be collapsed rapidly.Mc Kibbin and Cagliarini gave a good example here: Rising demands from China (and, to some extent, India), plus a booming world economy saw commodity prices rise across oil, minerals and food from late 2004 to late 2007. As a consequence, the global imbalances contribute in some potential shocks and structural changes of world’s economy system, because the direction of flows has many affects to the associated exchange-rates and the interest rate behaviors.By continuing to use this site, you consent to the use of cookies.We use cookies to offer you a better experience, personalize content, tailor advertising, provide social media features, and better understand the use of our services.In the late 2000s, the World suffered from a big global economic crisis which caused “the largest and sharpest drop in global economic activity of the modern era”, in which “most major developed economies find themselves in a deep recession”, according to Mc Kibbin and Stoeckel (1). Because its consequences have a very big impact to the whole world, many economists and scientist have tried to find the causes of the crisis; and some major causes have been emphasized are greed, the defection of the free market system, and the lack of prudent regulation and supervision. “Global imbalances.” London Business School and CEPR (2009): 2. • Replace only when needed: consumers were willing to delay their new purchases of cars or electronics and extend the lifetime of the current assets.• Shop smarter: people have begun to look out for promotions and special bargains, or use internet to find better or lower price.

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