Premium Essay

Kinderberg

In: Other Topics

Submitted By ebargainnow
Words 1135
Pages 5
Collapse of the U.S. sub-prime mortgage lending Market explained through The Kindleberger-Aliber-Minsky Paradigm

ABSTRACT

In this paper we examine the stages of the recent sub-prime mortgage financial crises through the models of the Kindleberger and Aliber paradigm from their book “Manias, Panics, and Crashes: A History of Financial Crises” and its aftermath. Kindleberger and Aliber’s paradigm is adapted from Hyman Minsky’s idea where events leading up to a crisis begins with a type of “displacement,” a type of outside shock to the macroeconomic system. The KAM model explores the three stages in which a financial bubble crisis is formed, fueled, and then popped. The Mania, also commonly known as the “bubble,” arises from aggressive investing in the market where the product’s liquid or real assets no longer plays a role in determining it’s worth, instead it’s values are based on pure optimistic speculation for prices to continually rise. Then Panics occur in the sub-prime mortgage area when there are insufficient funds available to repay the interests on loans and or the credits owed have mounted too high. At last, the Crash becomes imminent since banks nor lenders are willing to lend more money or to buy securities that have been formed by sub-prime mortgages. The securitization of the sub-prime mortgages were originally the profit makers but also ultimately the cause of the financial bust (Kindleberger and Aliber, 2011).

INTRODUCTION

The financial bubble’s origin is born from a displacement in the market. According to the KAM paradigm, the most likely shock factors which caused the displacement is related to the government’s change in policies and the technological advances associated with the internet. With the increasing popularity and the ease of accessing information via the internet, loans were more readily accessible as the lending market

Similar Documents

Premium Essay

Taxation

...Tables of contents Part 1 Introduction and Problem Statement 5 1.1Introduction 5 1.2Problem Statement 6 Part 2 Methodology 7 2.1 Theory of international financial center 7 2.2 Theory of bank management mode 8 Part 3 Analysis 10 3.1 Management mode of China Merchants Bank 10 3.21 Industrial structures 10 3.22 Services provide to customers 11 3.23 Source of profit 12 3.24 Financial products 12 3.3 The advantages of China Merchants Bank under the construction of international financial center 13 3.31 History and location 13 3.43 Headquarters circle 15 3.5 The challenges of China Merchants Bank under the construction of international financial center 16 3.52 Competitions from the non-bank financial institutions 17 3.53 Weakness in leading of Shanghai 17 Part4 Evaluation 19 4.1 The transformation of China Merchants Bank 19 4.11 Introduce financial talents 19 4.12Enhance the service satisfaction 21 4.13Adjust the industrial structure 22 4.14 Promote efficiency 22 4.15 Innovative financial products 23 4.2 GFIC analysis and People Factor 24 5. Suggestions 28 5.1 Diversified financial services 28 5.2 Financial personnel policy after the subprime crisis 29 5.3 Make reasonable risk early warning mechanism 30 6. Conclusion 31 7. Bibliography 32 Student statement 33 I hereby declare that the contents of my thesis on 33 Part 1 Introduction and Problem Statement 1.1Introduction In the development of financial globalization...

Words: 6911 - Pages: 28