...financial crisis in 2008. The economist had difficulty for seeing the systematic risk because of the unregulated new financial instruments such as credit default swap and derivatives securities. The Federal Reserve Bank was responsible for the financial crisis due to large amount of money flow in the United States. Thus, US needed to implement the monetary policy in order to overcome from the financial crisis. This paper drafted the causes of financial crisis analyzed by the macroeconomist and drafted by the American Bar Association. The Federal Reserve Bank kept the interest rates historic lows due to recession in 2000-2002. The low interest rates causes the unwanted money supply and this excess credit was invested heavily in the United States in the form of treasury securities and financial derivatives that leaded to bubble in commodities and houses prices. This paper examines the Federal Reserve monetary and fiscal policy during and prior to course of recession in 2008. The economy had faced at least three crises since 2008, fiscal crisis, financial crisis and unemployment crisis. These crises are interrelated. The unemployment crisis during 2008 has causes the fiscal deficit at the frightening level. The economy is still facing the unemployment and fiscal crises. The unemployment rate remains high in the world and the fiscal problem in Europe has not been fully resolved. The Fiscal Policy: The fiscal policy played a considerable role in the financial crisis during 2008...
Words: 1904 - Pages: 8
...The on-going financial crisis which has resulted in the collapse of financial institutions, downturns in stock markets and bank bailouts around the world since 2008 has led to the European sovereign debt crisis. The purpose of this essay is to analyse the effectiveness of several economic policies which can be used to solve this crisis. The essay looks at the effectiveness of fiscal austerity which has already been implemented by some European countries, then look at whether there is room for monetary policy, lastly looks at whether there is room for further policy recommendations. The European sovereign debt crisis refers to the collapse of several financial institutions in certain European countries which form part of the European Union, high government debt in these European countries as well as rapidly increasing bond yield spreads in government securities has caused a sovereign debt crisis. This on-going financial crisis, which began in 2008, has made it very difficult or even impossible for some country’s governments in Europe to pay back their debt without the assistance of third parties which then further increases their debt (Times, 2012). Economists have thought long and hard about ways in which they can improve and in essence solve the European debt crisis. One way of doing so is through fiscal policy, which refers to government spending and taxation. A fiscal consolidation, which is a term typically used to discuss government economic policy, refers to a policy...
Words: 437 - Pages: 2
...This article was downloaded by: [Loughborough University] On: 26 March 2015, At: 11:27 Publisher: Routledge Informa Ltd Registered in England and Wales Registered Number: 1072954 Registered office: Mortimer House, 37-41 Mortimer Street, London W1T 3JH, UK Public Money & Management Publication details, including instructions for authors and subscription information: http://www.tandfonline.com/loi/rpmm20 How the UK government responded to the fiscal crisis: an outsider's view Walter Kickert Published online: 23 Mar 2012. To cite this article: Walter Kickert (2012) How the UK government responded to the fiscal crisis: an outsider's view, Public Money & Management, 32:3, 169-176, DOI: 10.1080/09540962.2012.676273 To link to this article: http://dx.doi.org/10.1080/09540962.2012.676273 PLEASE SCROLL DOWN FOR ARTICLE Taylor & Francis makes every effort to ensure the accuracy of all the information (the “Content”) contained in the publications on our platform. However, Taylor & Francis, our agents, and our licensors make no representations or warranties whatsoever as to the accuracy, completeness, or suitability for any purpose of the Content. Any opinions and views expressed in this publication are the opinions and views of the authors, and are not the views of or endorsed by Taylor & Francis. The accuracy of the Content should not be relied upon and should be independently verified with primary sources of information. Taylor and Francis shall not be liable...
Words: 6397 - Pages: 26
...Causes of Economic Crisis of 2008 and its resulting Recession Student’s Name Institution Introduction The economic crisis of 2008 which began in the United States had great impact in the global economy. The economic crisis began slowly and grew into global economic crisis. It has affected the stock markets to the extent of stopping operations. In the US it is an issue which has been used as a campaign tool for presidential candidates to request for votes during their campaigns. Due to the crisis many US citizens have felt its impact and even lost their jobs. The crisis began with the United States housing market and gradually resulted into liquidity crisis (Steil, 2009). It is in this regard that this paper looks into the causes of the economic crisis of 2008 and its resulting recession. Causes of the 2008 crisis and its resulting recession Actually, the United States experienced many serious problems that included frozen money markets, plummeting dollar, banks on the threshold of bankruptcy, declining stock market, high levels of public debt and the impending threat of recession. According to some economists, the economic crisis was mainly affected by the world imbalances, perceptions of interest rates, risks and the regulations of the financial system. The following are the main causes of the economic crisis of 2008: Housing Crash The United States housing market is one of the main determinants...
Words: 1317 - Pages: 6
...Euro Crisis: Greece’s Reform to Uphold the Euro Greece has been a significant trading partner within the EU as well with the global community at large. Public spending has been at its highest since the financial crisis in 2008 and with irrational investing behind banks and the private sectors; it only worsened their economy. The complicated areas of the European economy mostly have been due to countries spending vast amounts of borrowed finances than they have fluctuating within their own nation. Countries deficits are still increasing after the US financial crisis and it has led to continuous austerity agreements and negotiations to prevent these issues from relapsing. Greece is in a classic sovereign debt crisis and while struggling to fix their deficit, (currently the largest in the Eurozone) this turned to controversial debates whether or not to let Greece free of the euro, or continue to keep them in. The problem of the matter relies heavily on the political sector of the union as well as the economic foundation represented in Greece’s past, showing that releasing the nation from the euro will only cause more harm than actually stabilizing them in. The US financial crisis of 2008 grew strongly towards the inefficiency between the banks and investors, who failed to act rational in accordance with the economy (Heath 401). In an efficient market, one person’s gains are another person’s loss but one cannot strategize placement in the market through someone making continuous...
Words: 1483 - Pages: 6
...THE ECONOMIC CRISIS AND ITS IMPACT ON EUROPEAN AND CYPRUS DEFENSE By Dr Aristos Aristotelous The relentless question of prioritizing and allocating scarce national resources to unlimited uses and requirements becomes even harder in times of economic crisis. In Cyprus - as in other EU countries - the tragic state of the economy and the need to exit from the crisis, brings unbearable pressure on military spending and is impacting on priorities in the defense field. Europe Under the burden of financial constraints and the need to protect or further enhance the welfare state, the defense sector in many European countries - especially after the end of the Cold War - was usually targeted for cuts, so as not to deprive other sectors from these funds. Today, with the neoliberal ideas of restricting or even terminating the welfare state, and in light of the crisis in Europe, the cuts are extended more drastically than before in other fields of government expenditure. However the defense sector still is for the governments and the European publics a much preferable area than pensions, health education, etc., for such cuts. Between 2009 - 2012, defense spending among NATO countries as a whole fell by $ 56 bn. Also among the countries of Europe in general, defense spending fell from $ 303.1 bn in 2011 to $ 280.1 bn in 2012 (IISS). Notable reductions were those of big countries like Germany, from $ 48.1bn to $ 40.3 bn and France from $ 53.4 bn to $ 48.1 bn. In those troubled economies...
Words: 873 - Pages: 4
...Crisis is an opportunity Since the turn of new century, a crisis occurs is an obvious and normal case as each country will have the advance technologic to predict and know before the crisis happened. Besides that, most of the country will face a crisis because it is a flow. From my own view point, a crisis can bring lots of advantages to the human being and the country. Furthermore, it is a ways which can let a country reborn and restructure. Firstly, in an economic crisis it is an opportunity for the investors because most of the investors will buy or get a cheaper share at the time when economic is downturn. Besides that, the investors will earn a lot of money and income if they can hold the share until the economic get well or reach the peak season. In addition, the investors also can get a good return on their investment. Subsequently, economic crisis is an opportunity for the environment as it can reduce the pollution. Generally, in the period of economic downturn, there is lack of business transaction can make for each industry. For example, Airlines Company will reduce the number of flying because at the time of economic crisis less people will spend their money on travel. This problem will directly reduce the air pollution and save the environment. Besides that, people who drive the car will also try to spend less on the petrol. Lastly, in a financial crisis will force the human being to change their spending habit as people virtually like to spend their money...
Words: 486 - Pages: 2
...Abstract The following paper offers a research, which raises a question. To what extent, has the Greek economy suffered as a result of the economic breakdown? Over the past decade, the Greek government has been relying heavily on foreign aid and the reliance on financing from international capital markets resulted to an accumulation in national debt. The interference of fiscal policy by the injection of money in the economy and the increase of money supply and the encouragement of consumption has been a huge factor in contributing to the overall outcome. I. Introduction According to many economists, the financial crisis of the late 2000s is considered to be the most severe financial crisis since the great depression of the 1930s. A downfall in the United States banking system was the trigger behind the formation of the crisis, which resulted in the breakdown of large financial institutions. The government was forced to bailout banks as a result and similarly the stock market faced a huge blow, not only in the United States but all around the entire globe. Well into 2006, the United States housing bubble flopped, resulting in the decrease in the values of securities causing the real estate pricing to vastly decline, which similarly resulted in the collapse of huge financial institutions all around the world. Foreign direct investment suffered a huge blow as damaged investor confidence and the decline in credit and security availability have contributed to the major collapse...
Words: 2174 - Pages: 9
...Library of the Federal Reserve Bank of St. Louis Economic Information Newsletter Monetary and Fiscal Policy in Times of Crisis March 2011 Classroom Edition An informative and accessible economic essay with a classroom application. Includes the full version of the Liber8 Newsletter, plus questions for students and an answer key for classroom use. Prepared by the Economic Education Group of the Federal Reserve Bank of St. Louis © 2011, Federal Reserve Bank of St. Louis. www.stlouisfed.org/education Permission is granted to reprint or photocopy this lesson in its entirety for educational purposes, so long as this copyright notice is included on all copies. Liber8 ® Brought to You by the Research Library of the Federal Reserve Bank of St. Louis Economic Information Newsletter Fiscal and Monetary Policy in Times of Crisis March 2011 “We [policymakers] have been bold or deliberate as circumstances demanded, but our objective remains constant: to restore a more stable economic and financial environment in which opportunity can again flourish.” —Federal Reserve Chairman Ben S. Bernanke, August 25, 2009 The recent financial crisis and recession prompted unconventional and aggressive actions by monetary and fiscal policymakers. Monetary policymakers turned to quantitative easing. Fiscal policymakers increased government spending and reduced taxes. To better understand these widely debated actions, it is helpful to know the underlying intent of the decisions...
Words: 1991 - Pages: 8
...The financial crisis comes at a time when the American economy was already highly vulnerable because of high energy prices, stagnant real incomes and persistent job losses since the start of the year. As a result, there is a high probability that the financial crisis will help tip the economy into a formal recession. The unemployment rate is virtually certain to be high than it otherwise would be because of the financial crisis. One key impact of the crisis will be on consumer spending. The natural correction to the 2004-06 phase when consumers were over consuming through equity extraction from their homes is a phase of under consumption. A second key impact will be on consumer confidence. Worries about the value of ones life savings and even the security of one’s money market account will likely have knock on effects on consumption. Third, the loss of financial wealth will have a negative impact on consumption. Economists typically find that for each dollar of lost financial wealth, consumption drops by 3-4 percent. This means, for example, that a sustained $100 billion loss in capitalization of the stock market would be expected to cut spending by at least $3 billion in the first year after the decline. With consumer spending representing 70% of US GDP, the net impact could be severe. The crisis is likely to have negative effects on business activity as well. Many small businesses are heavily dependent upon bank lending for commercial and industrial loans – to add to capacity...
Words: 310 - Pages: 2
... But since approximately 18 months the world economy is really struggling and resides in a severe recession which means according to the NBER (National Bureau of Economic Research) a “significant decline in economic activity lasting more than a few months” (recession.org-homepage, 2009). But how has this global economic crisis actually happened, how has it affected particularly people’s consumer behaviour of products and services and what will be going on in the future? The worldwide financial fiasco has occurred in a kind of domino effect and has its origin the US mortgage market. The turning point was, as the so called sub-prime loans lenders default their mortgages, banks could not sell the over taken houses anymore because none wants them and the real estate supply became much higher than the actual demand. As a result housing prices have tumbled down dramatically. Finally the financial bubble burst as banks, investors and lenders stopped buying their collateralized debt obligations from one another and the whole financial system was frozen. Since that time a lot of banks, companies and private households have gone bankrupt. To tackle the crisis financial institutions like the central bank have tried to boost the economy in cooperation with the governments through lowering the interest rate to almost zero. But there are two sides of the medal – while people on mortgages benefit from this, it is very bad for people with savings and especially pensioners who rely on the...
Words: 2733 - Pages: 11
...April 7, 2014 University Health care The United States is having major problems with crisis in health care such as high insurance cost, Medicaid and Medicare recipients, and uninsured people in America. The United States focus on Universal Health care or coverage. “The goal of universal health coverage is to ensure that all people obtain the health services they need without suffering financial hardship when paying for them (WHO, 2014)”. The cost of health care is continuing to rise and millions of people are without medical insurance. Business and facilities are closing, loss of jobs, high unemployment rates have become major crisis in health care in the United States. People who are employed are face with the challenges of being uninsured or paying higher rates but receiving lesser coverage. In addition, I will read and analyze the two articles, “The Health Care Crisis and What to do about it, (Krugman & Robin, 2006)”, and “Health Care Special Issue: Creative Destruction, (Cohn, 2007)”. “THE HEALTH CARE CRISIS AND WHAT TO DO ABOUT IT, (KRUGMAN & WELLS 2006)” The United States are continuing to have health care crisis such as high cost of insurance coverage, people who are uninsured, Medicaid and Medicare recipients, high unemployment rates and many other problems. The article “The Health Care Crisis and What to do about it, (Krugman & Wells, 2006)” discusses the crisis that America is experiencing and what solutions should be taking to improve the system...
Words: 1336 - Pages: 6
...Choose one of the two questions below: a. Describe your most valued accomplishment and explain why you view it as such OR b. Describe a time when you failed. What did you learn from that failure? How has that failure made you better equipped for the future? [300-word limit] My most valued accomplishment is achieving mission success with my Battalion in a military exercise. Our mission was to provide command and control, communication and computer (C4) support to my higher headquarters to conduct and control the exercise, which was held overseas in an area spanning 100km by 150km. Weather was hot and dry in the day and cold at night, especially in the mountains. The exercise lasted 2½ weeks. I led a total of 100 active and operationally-ready servicemen. We achieved mission success with timely establishment of the C4 networks. My Battalion had zero traffic and disciplinary breaches. My soldiers’ morale were high throughout the exercise. During the post-exercise review, the director of exercise singled us out for our excellent performance. I value this the most because I have achieved it by applying skills I learnt. For mission success, I conceptualized the plan and strategized the employment of my assets for optimal coverage in the vast area. I supervised the execution and empowered my subordinates to make ground decisions. This allowed me to focus on planning subsequent operations and engaging higher headquarters. The espousal of values such as leadership, discipline...
Words: 1088 - Pages: 5
...the economic crisis that gripped most of Europe during 2008 – 2009? Poland was able to avoid the worst effects of the economic crisis that gripped most of Europe during 2008- 2009 mainly because they were able to keep investors. Poland keep its public debt in check and as a result acquired investors from other countries (Hill, 2014). Poland is a democratic government and a member of the European Union which allows they better access to international trade and foreign investment. Poland is a major exporter, the percentage of exports is more than double what the US is. Poland is a young country it the global economic market (Hill, 2014). It is still growing and has little time to build up debt, this is the main reason Poland was able to avoid the worst effects of the economic crisis unlike the other countries in Europe and around the world. 2. What lessons can be derived for the Polish experience during 2008-2009? The lessons that can be derived for the Polish experience during 2008-2009 are export more and spend less. Poland was and still is a major exporter. Exporting helped Poland grow during the crisis when everyone else was feeling the effects. Poland was able to keep its public debt in check. The polish government was even criticized for the tight spending policies but it worked for them because they were able to gain investors for the same countries that criticized them earlier that decade (Hill, 2014). Exporting brought money in and the tight spending policies kept...
Words: 565 - Pages: 3
...| The Eurozone Crisis | | | ECON 3860Word Count: 1,495 | | The Eurozone Crisis The Eurozone is a combined group of countries using the euro as their only currency. It was created in 1999 and currently consists of 17 countries – not all part of the European Union (Investor Words). Within the Eurozone, the countries follow a monetary policy and controlled by the European Central Bank (in other words, the ECB controlled the supply of the euro within the 17 countries). In an attempt to control government debt levels and deficit spending the Maastricht Treaty was created. As years passed, some countries government deficit began to rise and increased debt levels. By 2010, Greece (3% of the Eurozone) had public debt around 100% of their GDP. In order to lower their debt levels, the Greek government had increased their taxes and their borrowing levels. Solutions for fixing this issue consisted of stronger countries paying off the Greek debt – however not everyone agreed to such methods. Eventually, the value of the euro went down in the exchange markets and other Eurozone countries such as: Portugal, Italy, Ireland and Spain faced the same problem as Greece. The International Monetary Fund (IMF) and the European Financial Stability Facility (EFSF) donated money to help reduce the amount of debt – however not enough (Krugman, Obstfeld, Melitz, 2011). Since the Eurozone is controlled by monetary rules and does not consist of fiscal union (government collection of tax’s)...
Words: 1717 - Pages: 7
