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.Tags: Good Appeal EssaysEssay Why Are You Going To CollegeIntroduction To An Essay About EducationCreative Writing Programs CollegeBiotech Business Plan TemplateEssays On Drug Abuse In SchoolsCompare And Contrast 1. Between-Subjects With Within-Subjects DesignsCornell Mba Essays AnalysisOscar Wilde Essay On AestheticsCritical Thinking Interview Questions Answers
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.