Free Essay

International Financial Crises

In: Historical Events

Submitted By emikhan
Words 2046
Pages 9
International Financial Crisis and reasons
The financial crisis of 2007–2008, also known as the Global Financial Crisis and 2008 financial crisis, is considered by many economists to be the worst financial crisis since the Great Depression of the 1930s.
Many causes for the financial crisis have been suggested, with varying weight assigned by experts. The U.S. Senate's Levin–Coburn Report asserted that the crisis happened because of:
1-High risk
2 Complex financial products
3-Undisclosed conflicts of interest
4-The failure of regulators
5-The credit rating agencies
6-The market itself to rein in the excesses of Wall Street
7-Weak and fraudulent underwriting practices
8-Deregulation
9-Predatory lending
10-Increased debt burden or over-leveraging
11-Boom and collapse of the shadow banking system
12-Commodities boom

Financial crisis in Pakistan and Reasons
1-One of the immediate causes is Political instability due to Musharaf’s position as president, delay in restoring judiciary and resultantly withdrawal of PML (N) from the alliance leaving behind ‘dead’ ministry of finance. In contrast the present government is not showing strong will to cope with the situation. Though some Positive Measures. To end Load Shedding till 14th August, 2009, Benazir income Scheme programmed, Distribution of Land in Sindh, tight Tariff System against luxury items

2-Suicide attacks in the industrial cities-fear among people, disinvestment and maximum outflow of capital, especially in Dubai stock exchange crash.

3-Foreign investment in 2007 was $ 700,63.5 million but in 2008 only $329 million.

4-Soaring oil prices due to increased demand from growing economics of China and India, Iraq crisis, Iran holding its oil export, devaluation of Dollar after Iraq invasion and limited supply by OPEC, refusal of Saudi Arabia to enhance its oil supply. More population to use energy from to $ 134/ barrel in 2008.

5-Food crisis oil prices, low agriculture yield due to heavy cost of production (seeds, pesticides, water and fertilizers), unavailability of small loans to small farmers, power shortage, fast increasing of population, poor governance in managing the food and to stop its smuggling to Afghanistan. Central Asia and Iran which stored big food stocks due to American war. World Food Crisis encouraged its smuggling. Less attention by the governments to live stock, dairy stock, increased circulation of paper currency. Big share of ‘Middle Man’.

6-World Food Crisis: population explosion, emergence of middle class with more food consumption in India and China. Low yield in India. Earthquake in China, increase in world oil prices.

7-Energy Crisis

8-Inflation means price hike, huge war between demand and supply, too many rupees chasing too few things. More supply of Money due to; AID after 9/11. Foreign Remittances due to over seas Pakistanis, growth in banking sector and investment in real estate. Poor supply of goods, food items due to low yield. Inflation due to rise in oil prices, food, removal of food subsidy, devaluation of Rupee, higher import price, Government borrowing from State Bank Rs . 544 billion. Resultantly increase in wage-price. Delay in monetary tightening by the State Bank. Government claims 25% while actual is 32% while food inflation is 45%

9-Deceleration of growth in manufacturing: energy crisis. Terrorist incidents. High interest rates by SBP discouraged Private investment. High imports and low exports. 75 industrial units in Karachi and 85 in Faisalabad were closed due to energy crisis.

10-Fiscal deficit: 6.5% of GDP, target was 4%. Due to slippage in revenue and expenditure- Dismal Growth; lower Tax collection. Heavy subsidy on oil effected current expenditure, increased in development expenditure. Decline external financing flows, so the government borrowed from SBP which caused monetary expansion, continuous Defense Budget.

11-Poor tax system:

Only salaried persons pay regular tax, while the major sectors find safe path through corruption. Agriculture tax cannot be imposed due to feudal in policy making.

12-Unilateral growth:

Production was not encouraged by the previous government, rather Pakistan was made a consumer society, services sector was enhanced which created less jobs.

13-China factor:

Cheaper Chinese products destroyed our industry thus created unemployment, more burdens on economy.

14-Illiterate labor: is less productive

15-Defence budget at the expense of economic development

16-Regional conflicts has marred the gas pipelines and usage of Gwadar.

17-Overpopulation at the rate of 1.9% is swallowing the resources

18-IMF loans hinder development and put burden on the masses.

* According to different Analysts of the Pakistan
Crisis happened because of: * Acute energy crisis * High rate of interest * High cost of production * Inflation * Deteriorating law and order situation * Poor industrial infrastructure * Decline in FDI and joint venture with foreign investors * A bewildering stock market * A perceptible slowdown in the manufacturing and services sectors * Terrorism * Lack of good governance The other international elements include global recession, credit crisis, weak economic prospects of the EU, USA, and limited access to international markets and specific countries.
Pakistan’s economic downturn is due to its internal economic reasons instead of direct impact of financial crisis 2008. Pakistan’s banking sector
Pakistan’s banking sector is made up of 55 banks, which include thirty two commercial banks, four specialized banks, six Islamic banks, seven development financial institutions and six micro-finance banks.
According to the 2007-08 Financial Stability Review from the State Bank of Pakistan (SBP), 'Pakistan’s banking sector has remained remarkably strong and resilient, despite facing pressures emanating from weakening macroeconomic environment [sic] since late 2007'.
According to Fitch Ratings, the international credit rating agency with head offices in New York and London, 'the Pakistani banking system has, over the last decade, gradually evolved from a weak state-owned system to a slightly healthier and active private sector driven system'.
The data from the banking sector for the final quarter of 2008 confirms a slowdown after a multi-year growth pattern. In October 2008, total deposits fell from Rs3.77 trillion in September to Rs3.67 trillion. Provisions for losses over the same period went up from Rs173 billion in September to Rs178.9 billion in October. At the same time, the SBP has jacked up interest rates: the 3-month Treasury bill auction saw a jump from 9.09% in January 2008 to 14% in January 2009, and bank lending rates are now as high as 20%.
Overall, Pakistan’s banking sector has not been as prone to external shocks as have been banks in Europe. Liquidity is tight, certainly, but that has little to do with the global financial crisis and more to do with heavy government borrowing from the banking sector, and thus tight liquidity and the ‘crowding out’ of the private sector.

Macroeconomic problems of Pakistan
Implementation of difficult policy choices, and not their diagnosis, is the real problem of economic management in Pakistan. The main macro-economic problems of Pakistan are well known to even ordinary citizens and well-articulated by professionals. These are: slow and erratic economic growth, persistently high inflation, extreme poverty of the bulk of the population coexisting with prosperity of a few, deep and rising debt burden, and huge budget deficit.
On the face of it, these seem to be problems emanating from diverse sources but in reality these are mainly the product of one factor, and that is poor governance giving birth to mismanagement of public finances which, in turn, has become the mother of all economic ills. It should be clear by now that Pakistan cannot dig itself out of its deep rooted budgetary problems by continuous reliance on printing of notes by SBP in excess of country’s capacity for their non-inflationary absorption and/or by continuous accumulation of expensive and ineffectively used external debt by the government. Continuation of such a course will intensify inflationary pressures, plunge the country in a steeper hole of debt trap, accentuate structural problems, impede long term economic development and socially and politically destabilize the country in a big way. Pakistan desperately needs a clean break from this failed approach, and implementation of policies to place the budget on sound footing is the first order of business for Pakistan.
Budgetary measures should include mobilization of additional revenue resources, severe curtailment of inessential and unproductive government expenditure, and honest and efficient use of development expenditure to facilitate economic development and improve economic wellbeing of the majority of the population. In addition, SBP should implement a prudent monetary policy that is not hostage to the financing needs of the government. The subsequent section of this paper is devoted to an outline of the direction in which fiscal policy, and its twin, monetary policy, must move in actual practice, with only a passing reference to some of the other pressing policy issues. IMF and World Bank
It is worthwhile to note that IMF and World Bank, which have been involved with the economy more often than not during this entire period, have also exhibited no better pattern in their performance in Pakistan. While diagnosing economic problems in a professional manner, and producing some good analysis of several aspects of the economy of Pakistan, they went along with short term economic policy patchwork undertaken by successive governments, without a long term strategy for economic and social development. In particular, they easily accommodated lapses in policy promises and commitments, particularly in the budgetary and governance areas, mainly with a view to supporting and sustaining even inadequate and collapsing programs to avert a foreign debt default by Pakistan that could engulf them also in a crisis.
Endorsement by international financial institutions of inadequate short term policies, and their willingness to assist the authorities in obtaining additional foreign loans based on such policies, provided life support to various governments, and enabled them to remain current in repayment of foreign debt, but landed the country in deeper long term debt difficulties. Moreover, attitude, and nature and severity of conditionality of international financial institutions fluctuated from time to time depending on the attitude and influence of their largest shareholders, who, in turn, were driven by their own changing security and strategic national considerations. Most of the bilateral and multilateral loan inflows arranged under programs with IMF and World Bank dissipated in foreign debt repayments, technical assistance for various purposes, training programs for manpower abroad, consultancy fees, hiring of national and international experts at expensive rates and leakages through pilferage and corruption. There is no evidence on the ground to show that the large amount of accumulated foreign debt of the country was used productively in building up of the base for export sector, agricultural and industrial development or viable infrastructure projects that could help generate foreign exchange for future repayment of foreign debt. As a result, increasing foreign debt servicing liability, without a corresponding expansion in foreign exchange earning capacity, has entrapped the country in a vicious circle of more external borrowing and more foreign debt servicing. These multilateral institutions, if they are serious about economic welfare of Pakistan, should change their approach and make a genuine and bold effort to reduce foreign debt burden of the country through concessional rescheduling, and restructuring and write offs, rather than keeping governments afloat through additional lending that enables foreign creditors to continue to get paid on time. For this change to take place in IFIs, the government and people of Pakistan need to first decide and demonstrate determination to move on a self-sustaining, and self-respecting, path of economic and social development. Simultaneously, and in the context of a comprehensive strategy to reduce foreign debt burden, these institutions should help the Government to implement long term structural reforms in several areas to increase domestic saving rate to a level that can finance a large component of domestic investment requirements. A continuation of the past approach of indiscriminate bilateral and multilateral borrowing, and its ineffective use by Pakistan government, is bound to land the country in a much more serious balance of payment and economic crisis, from which it will find increasingly more difficult to recover.

http://www.cssforum.com.pk/css-compulsory-subjects/essay/essays/22871-economic-crisis-pakistan.html http://www.nation.com.pk/pakistan-news-newspaper-daily-english-online/business/19-Apr-2009/Pakistan-less-affected-by-financial-crisis-Raza http://download-reports.blogspot.com/2011/02/financial-crisis-2008-and-its-impact-on.html

Similar Documents

Premium Essay

Islamic Finance: a Therapy for Healing the Global Financial Crisis

...Islamic Finance: A Therapy for Healing the Global Financial Crisis Miranti Kartika Dewi 1 *Researcher of Centre for Islamic Economics and Business ** Lecturer of Department of Accounting Faculty of Economics, University of Indonesia Ilham Reza Ferdian * Student of Master of Science on Finance Programme Kuliyyah of Economics and Management Sciences International Islamic University Malaysia ** Fellow of PT. Bank Muamalat Indonesia ABSTRACT Global financial crisis which hit many too-big-too-fail countries and financial institution in the world was mainly made happen by debt securitization. Derivative instruments resulted from this process obviously were not backed by real asset. When any party came up with investment on these instruments, the investment would never support the development of real sector economy, instead, it just worsen the situation by creating bubble economic. This condition becomes more harmful when the securitized debts default. This practice is strictly forbidden according to Islamic finance principles. It has inherent risk management tools to prevent the crisis. This paper attempts to examine the root of the financial crisis and find the solution from Islamic finance principles. Keywords: Financial crisis, Derivative, MBS, CDO, CDS, Islamic finance                                                              1  Corresponding author can be contacted by email: miranti_k_dewi@yahoo.com. “The credit and capital markets have grown too......

Words: 2256 - Pages: 10

Free Essay

Agency Therory

...IT and International Real-Time Media: Amplifier for a Crisis or Instrument of Rational Decision-Taking Narelle Gomes, Christian Piechorowski 09.01.2014 Table of contents: 1.1 Information technology’s impact in the development of the stock exchange 1.2 Algorithmic trading 1.3 High frequency trading 1.4 High frequency; trading beneficial or harmful for the economy? 1.5 Final Remarks 2.1 The Influential Role of Mass Media - The Pervasiveness of the information disseminated on the people 2.2 Financial Crisis- A media spectacle? 2.3 The mishaps of European Media during the current Euro crisis 2.3.1 The alternative view of the media; Citizens mistrust towards the media 2.3.2 The wavering power of mainstream amidst its pervasiveness 3. Conclusion Introduction Problem Description: The world financial crisis started in the US with the burst of the housing bubble in 2007. However, it was not just limited to the US border, but it rapidly spread all over the world. Consequently, many banks went bankrupt and some countries were even pushed into a financial downturn. Target of Study: This essay will not provide a general outlook on the financial crisis but instead examines the impact of the Real time media and IT on this economic crisis of historic scale. How......

Words: 4847 - Pages: 20

Free Essay

Financial Crisis

...09-093 July 22, 2009 The Global Financial Crisis of 2008 – 2009: The Role of Greed, Fear and Oligarchs Cate Reavis Free enterprise is always the right answer. The problem with it is that it ignores the human element. It does not take into account the complexities of human behavior. 1 —Andrew Lo, Professor of Finance, MIT Sloan School of Management The problem in the financial sector today is not that a given firm might have enough market share to influence prices; it is that one firm or a small set of interconnected firms, by failing, can bring down the economy. 2 —Simon Johnson, Professor of Entrepreneurship, MIT Sloan School of Management, Former Chief Economist, IMF On October 9, 2007 the Dow Jones Industrial Average set a record by closing at 14,047. One year later, the Dow was just above 8,000, after dropping 21% in the first nine days of October 2008. Major stock markets in other countries had plunged alongside the Dow. Credit markets were nearing paralysis. Companies began to lay off workers in droves and were forced to put off capital investments. Individual consumers were being denied loans for mortgages and college tuitions. After the nine day U.S. stock market plunge, the head of the International Monetary Fund had some sobering words: “Intensifying solvency concerns about a number of the largest U.S.-based and European financial institutions have pushed the global financial system to the brink of systemic meltdown.” 3 1 2 3 Interview with the case......

Words: 10022 - Pages: 41

Free Essay

History of Economic Calamities

...As far as we know, there were more than five economic and financial crises during the recent 200 years. Society was suffering from such downturns, because each of them had its own characteristics and consequences which affected the whole economic world. In the next passages I would like to tell you about the history of financial crises and about the solutions made by governments and departments which helped to reduce the bad effects of it. Not a single year has gone by in the past two centuries where there was not a financial crisis somewhere in the world (see figure 1). Arguably, the world witnessed its first international financial crisis in 1825. The opening up of Latin America after the overthrow of the Spanish empire led to the opening up of international trade between England and the Latin American republics. The result was massive capital flows from London to finance infrastructure, mining and government spending. But once the capital outflows impinged on the Bank of England’s (BoE) gold reserves, the policy rate was raised, leading to a banking crisis. A sudden stop of capital flow from London resulted in banking panics in the US and currency crashes across Latin America. Figure 1: The history of financial crises Indeed, the crisis in 1825 marked the first of seven clusters of sovereign defaults in the period 1800 to 2010 In the first cluster of defaults, which happened during 1824-1834, 13......

Words: 1690 - Pages: 7

Premium Essay

Interdependence of World Financial Markets and Foreign Exchange Fluctuations

...Dr. K. Kuperan Viswanathan SHORT PAPER #1 INTERDEPENDENCE OF WORLD FINANCIAL MARKETS AND FOREIGN EXCHANGE FLUCTUATIONS Submitted by: ZAHARIN BIN ALI MATRIC No. 95906 June 14, 2014 Short Paper #1 Page |2 1. INTRODUCTION With the increase in advancements in transportation and communications made possible by technology, the world has seen exponential growths in economic ties among all nations. In the last few decades, globalization has resulted in a rapid surge in the interchanging of goods and services reaching across further and faster beyond national borders, whilst increasing the interconnectedness of different markets and cultures. These economic ties come in the forms of international trade, foreign direct investment and monetary integration, made possible with the complementary increase in the interdependence of international financial markets. With further liberalization and deregulation, financial market interdependence grew in momentum alongside the worldwide capital mobilization. This growing interconnectedness of all the world financial markets and the degree of their interdependence have themselves created a subject of substantial interest among economists. The recent global financial crisis has only elevated this interest further, as the impact of U.S. subprime crises on the world economies have provided evidence of global financial markets interdependence. Many international stock markets, for example, experienced their worst abrupt declines in...

Words: 4027 - Pages: 17

Free Essay

Financial Crisis

...Journal of Contemporary Eastern Asia ISSN 2383-9449 Fumitaka Furuoka, Beatrice Lim, Catherine Jikunan and Lo May Chiun (2012) Economics Crisis and Response: Case Study of Malaysia’s Responses to Asian Financial Crisis Journal of Contemporary Eastern Asia Vol. 11, No. 1: 43-56 Journal abbreviation: J. Contemp. East. Asia Stable URL: http://eastasia.yu.ac.kr/documents/Fumitaka_11_1.pdf www.JCEA-Online.net Open Access Publication Creative Commons License Deed Attribution-No Derivative Works 3.0 Journal of Contemporary Eastern Asia, Volume 11, No.1: 43-56 http://dx.doi.org/10.17477/jcea.2012.11.1.043 Economics Crisis and Response: Case Study of Malaysia’s Responses to Asian Financial Crisis Fumitaka Furuoka, Beatrice Lim, Catherine Jikunan and Lo May Chiun The paper chooses the “Asian Financial Crisis” as a case study to examine its impact on Malaysian economy and describes how Malaysian government responded to the crisis. It also focuses on the Asian financial crisis’ impact on the employment of banking sector in Malaysia. In the finance, insurance, real estate and business service sector, a number of 6,596 workers were retrenched. Banks were forced into mergers and acquisition as well as downsizing, trim lean, organizational changes and introduction of new technologies. Excess workers were offered a “voluntary separation scheme.” These retrenched workers became the urban poor facing high cost of living and no opportunity for jobs as there is no safety net provided. 1.......

Words: 7422 - Pages: 30

Free Essay

The East-Asian Crisis

...THE EAST ASIAN CRISIS Introduction: The East Asian crisis was a period of financial crisis that gripped much of Asia which beginning in July 1997 and raised fears of worldwide economic meltdown due to financial contagion.1 Several countries such as Malaysia, Thailand, Indonesia, the republic of Korea and the Philippines were hit directly while others such as Taiwan province of China, Singapore and especially Hong Kong, China were badly affected. What began as a speculative attack on the Thai baht in July 1997 quickly spread as ‘contagion’ to the other countries. Over a three-month period between July and October 1997, the baht fell nearly 40 per cent, the Malaysian ringgit and Philippine peso by about 27 per cent, the Indonesian rupiah by about 40 per cent and the Korean won approximately 35 per cent against the United States dollar. For countries that had been dubbed “miracle economies” this was a serious blow with wide-ranging economic, social and political ramifications.2 In this paper we would try to undertake an empirical analysis of the factors leading to the crisis by analysing on two major points: 1) How have these countries performed in the years leading to the crisis? 2) What was the policy response to the currency crisis and what similarities/differences were there in policy responses across countries? We try to do this by analysing the macroeconomic data of three countries, Malaysia, Thailand and the Republic of Korea, over a 13-year period, from 1990 to 2002.......

Words: 2206 - Pages: 9

Free Essay

Financial Economics

...1.Introduction This essay is based on the financial crisis from 2007 to 2008, which discuss whether the time at that moment is different. Here, we focus on the financial crisis happened in USA around these two particular years, therefore we mainly talk about ‘U.S Sub-prime Crisis’. Section I is to summarize the ideas that Reinhart and Rogoff provide according the book ‘This Time is Different: Eight Centuries of Financial Folly’ (2011) and their working papers. Section II is to evaluate and counter critically toward their argument. Also, a conclusion will be drawn after these two sections. 2.Section I The basic idea that Carmen M. Reinhart and Kenneth S. Rogoff suggests is that what happened in 2007 and 2008 was nothing different from previous financial crisis. They consider financial crisis can be traced by past experience from different countries around the world as usual. Their book and working papers introduce massive historical database which have constructed to study the debt (both external and internal), banking crisis, inflation, currency crashes and so forth. There are sixty-six countries included in the data, such as Africa, Asia, Europe, Latin America, North America, and Oceania (Reinhart and Rogoff, 2008). They studied various types of financial crises, however, the book mainly includes sovereign defaults and banking crises as these two forms of crises are particularly relevant to modern society. They covered government debt defaults in eight......

Words: 2283 - Pages: 10

Free Essay

Executive Compensation

...Regulation of Executive Compensation and its impact on the stability of the financial system | | Introduction In corporate circles, the financial crisis and its effect on companies is sometimes illustrated as a systematic phenomenon in which there is no individual responsibility. Public discussion, on the contrary often assigns the blame of the crisis to bankers or managers, and suggests conclusions of salary reductions or individual liability in terms of losses. In this paper the implications of executive compensation surrounding the financial crisis will be debated. Firstly, the types of executive compensation will be discussed and the implications of them. Secondly, how executive compensation contributed to the financial crisis will be conferred and thirdly the legal improvements and current process will be analysed. To aid understanding, articles and examples will be used to emphasise the various views of economists regarding executive compensation. Non-Regulation of Executive Compensation Executive Compensation can be described as the monetary bonus, or the non-monetary benefits which an executive receives for their work in an organisation. Executive Compensation can be a highly motivating incentive to work more efficiently, thus benefiting the organisation and keeping the executive content with his contribution and performance. However, this compensation can have adverse effects where the executive does not have the organisations best interest in mind,......

Words: 2530 - Pages: 11

Free Essay

Zombie Bank

...United States. In Zombie Banks, the author has shown us the practice of zombie banking, explained why it does not work, and laid out the steps needed to rid the global financial community of these dangerous institutions. Zombie bank started to appear in 1990s with the huge declining of the price of real estate and stocks. It pulled every Japanese banks into huge bad debt situation. However, Japan refused to accept the suggestion from the US and took a way that government secretly support those bad debt banks instead of bankrupt. This solution do nothing good to the improvement for its financial situation and made Japan’s economy depressed for a decade. While covering the collapse of Lehman Brothers and Bear Stearns in 2008, Onaran discovered that no one within those organizations had the complete picture of how the companies functioned and, therefore, no one had any answers. Zombie Banks is Onaran’s attempt to connect the dots that make up the current global financial landscape. Zombies are most commonly known as undead, lifeless creatures that usually take hold of a living being through some type of supernatural force. However, as the author illustrates in his new book, zombies can also inhabit the inanimate objects—in this case, banks. “Zombie Banks” are described as “insolvent financial institutions whose equity capital has been wiped out so that the value of their obligations...

Words: 587 - Pages: 3

Free Essay

Financial Crisis

...Throughout the history and even today we often hear about the term financial crisis. Every day on the news we can hear about the financial crisis in some countries and how they are trying to prevent it or to get out of it. Especially about the financial crisis in Greece. So what exactly is financial crisis? There have been a lot of definition of what financial crisis is, but they all agree in one thing financial crisis appears when some institution or assets suddenly lose a large part of their value. In the 19th and early 20th centuries, many financial crises were associated with banking panics, and many recessions coincided with these panics. Other situations that are often called financial crisis include stock market crashes and the bursting of other financial bubbles, currency crises and sovereign defaults. There a lot of types of financial crisis: banking crisis, speculative bubbles and crushes, wilder economic crisis and other crisis. But from all of them, today the most frequent financial crisis is the banking crisis. This happens when a lot of the depositors withdraw their deposits from the bank, causing the bank to bankrupt. This kind of crisis happened in 2007-2008,also known as the global financial crisis and 2008 financial crisis. This crisis is considered by many economists to be the worst financial crisis since the Great Depression. This crisis was called the worst because it was spreading really quickly all around the world. But what causes this......

Words: 519 - Pages: 3

Premium Essay

Financial Crisis

...were the origins of the Asian currency crisis? The Asian currency crisis was a period of financial crisis started in Thailand in July 1997. Many Asian countries experienced a financial crisis are a large drop in the value of its currency and a large drop in its traded equity prices. Before the crisis happened, many Asian countries produced a dramatic reduction in poverty and rapid economic growth. Behind the boom, there are lots of imbalances: large current account deficit was financed increasingly by short-term inflow; the real exchange rate had appreciated to an unsustainable level; and export growth had slowed obviously. Based on a literature review, a great deal of effort has been made to trying to understand the origins of the crisis. One view is that weaknesses in Asian financial systems were at the root of the crisis. The lack of incentives for effective risk management created by implicit or explicit government guarantees against financial failure caused the weaknesses. The large capital inflows, rapid economic growth and pegged exchange rates also accentuated the weaknesses of the financial sector. An alternative view is that there was not anything wrong with East Asian economies with historical good performance. The large capital inflows to finance productive investments made them vulnerable to a financial panic. The inadequate policy responses to the panic caused the financial crisis and the economic disruption (Sachs and Radelet 1998). What role did......

Words: 774 - Pages: 4

Free Essay

Financial Crisis

...Fakultet:Ekonomski nauki –Strumica Financial Crisis -esej- Predmet:Angliski jazik 1 Izrabotil: Profesor:Natka Jankova Elena Garvanlieva Indeks: 9532 Strumica,dekemvri 2012 Throughout the history and even today we often hear about the term financial crisis. Every day on the news we can hear about the financial crisis in some countries and how they are trying to prevent it or to get out of it. Especially about the financial crisis in Greece. So what exactly is financial crisis? There have been a lot of definition of what financial crisis is, but they all agree in one thing financial crisis appears when some institution or assets suddenly lose a large part of their value. In the 19th and early 20th centuries, many financial crises were associated with banking panics, and many recessions coincided with these panics. Other situations that are often called financial crisis include stock market crashes and the bursting of other financial bubbles, currency crises and sovereign defaults. There a lot of types of financial crisis: banking crisis, speculative bubbles and crushes, wilder economic crisis and other crisis. But from all of them, today the most frequent financial crisis is the banking......

Words: 546 - Pages: 3

Free Essay

Bank Ceo Incentives Were the Major Factor in Credit Crisis

...TABLE OF CONTENT | PAGE | | 1.0 | Introduction | 1-2 | | | 1.1 | Bank CEO incentives | 2 | | 1.2 | Credit Crisis | 2 | | | | | 2.0 | Bank CEO incentives were the major factor in credit crisis | 2-5 | 3.0 | Conclusion | 6 | | | | 4.0 | References | 7 | 1.0 Introduction Bank CEO and the credit crisis was it related to each other? There is a statement which is ‘Bank CEO’s incentives were a major factor in credit crisis.’ First of I would like to explain a few terms in the topic. A CEO stand for Chief Executive Officer meanwhile, incentives here doesn’t only mean money or material incentives. It also includes motivation either positively or negatively towards the CEO. Therefore, the statement says that the lack or abundance of incentives to the CEO is the major factor for the past credit crisis. CEO incentives were not the major cause for the credit crisis based on my research from the journals and articles. I totally oppose these because I have gathered valuable evidences from journal and articles that I have read online. 1.1 Bank CEO Incentives There are several titles for the position Chief Executive Officer (CEO) such as Managing Director, Executive and President. The responsibility of CEO is different from one another according to their size, scope of work and an organization. CEO plays an important role by making a decision, hiring of staff. Besides that, CEO will have communication deal with board of directors and......

Words: 1783 - Pages: 8

Free Essay

Impact of Credit Crunch on Ibm

...TABLE OF CONTENTS Introduction 2 Global Impacts of the Credit Crunch 3 IBM – International Business Machines 4 Table 1: IBM’s Financial Performance History 2000-2009. Source: IBM Annual Report 2009 5 Table 2: Earnings per share 2006 to 2010 projection. Source: IBM Annual Report 2009. 6 How the Credit Crunch Impacted IBM’s Operations 7 Global Integration 7 Changing Business Scope 7 Revenue 8 Human Resource Management Impacts 8 Price Instability 8 Exchange Rate Fluctuation 8 Interest Rate Fluctuations 8 Debt 9 Notable Impacts 9 IBM’s Operational Strategy 10 Strategic Response 10 HRM Strategy 10 Value Chain Strategy – Developing a Business of Values 11 Table 3: IBM Value Chain. Source – ibm.com/services 12 International Strategy 13 Institutional Strategy 13 Recommendations for Future Growth 14 Delivering Value to Customers 14 Human Resource Capital 15 Research and Development 16 References 17 Bibliography 18 Introduction The ‘Credit Crunch’ emerged in 2007 with the first effects being felt by the U.S. Mortgage industry. The term ‘credit crunch’ came was used to describe the collapse of the subprime mortgage industry that resulted in a freeze in lending by financial institutions. With non-payment of loans, huge debt and no capital gains, financial institutions began to go under. Investment banks, financial services and real estate market felt immediate impacts. Trillions of U.S. dollars were lost, huge government......

Words: 3757 - Pages: 16