The Financial Crisis and Credit Crunch Analysis - 3503 Words

The financial crisis and credit crunch Analysis. The global financial crisis began in 2007 with the credit crunch as a result of loss of confidence in the value of the sub-prime mortgages by the US investors that caused a liquidity crisis. In an effort to curb the crisis, the US Federal Bank pumped in huge amounts of capital into the financial markets to gain back the investor confidence. In September 2008, the crisis deepened and the global stock markets came crushing. The investor confidence was lost due to the volatility in the market and the uncertainty in the future of their investments as more investors became risk averse, essentially, it is the mortgage market meltdown that triggered the global financial crisis. Many Americans embraced the use of credit cards for their daily transactions as a result of the stability in the financial markets and could spend money in excess of their incomes due the excellent performance in the stock markets as well as other investments. They majorly relied on their investments to bridge or finance the cash gap and the financial infrastructure was perfect. Millions of investors in the US had borrowed money against their homes and the effects of the financial downturn severely hit the housing market. The ever rising value of the houses in the early years and the perceived stability in the mortgage backed securities led the banks and other lenders to believe that the risks in the prime loans could be contained and that the trendShow MoreRelatedThe Loose Noose : Failure Of Regulators1333 Words   |  6 Pagesmoral hazard and this happens to be an expensive mistake and as Lehman file for bankruptcy, this passed a wave of panic in the already falling markets and tr ust – the key element of the market is lost leading into the 2007-08 financial crisis. Consequences of the 2007-08 crisis Immediate aftermath The very first after effect of the economic downturn is the plummeting of housing prices. As more and more borrowers defaulted, the mortgages were foreclosed pushing more and more houses into the market.Read MoreConcepts of Microeconomics in a UK-Based Organization: Barclays Case Analysis2578 Words   |  10 Pagesï » ¿Impact of Credit Crunch on UK Northern Rock: The credit crunch can be basically described as the increasing costs of borrowing money due to prevailing situations and rising interest rates. The increase in the interest rates resulted in the inability of many people to afford the repayments on mortgages that led them to default. The rising interest rates had huge effects on the subprime market in the United States in which money was lent to probable risky debtors. Credit crunch was not only exacerbatedRead MoreCredit Crunch Impact in Bank of England Essay examples3777 Words   |  16 Pagesone specific multinational enterprise with which you are familiar, examine the ways in which ‘credit crunch’ has impacted its operations. Evaluate the strategic responses it has made, and might make going forward, to respond to the impacts of the credit crunch on its operations. Introduction; This work will focus on the broader economic impact of the crisis in credit markets, which began over three years ago with the downturn in United States (US) sub-primeRead MoreThe Financial Crisis Of 2007-20081419 Words   |  6 Pagescause of the recent credit crunch. The financial crisis of 2007–2008, also known as the Global Financial Crisis and 2008 financial crisis, is considered by some economists such as Nouriel Roubini, professor of economics and international business at New York University, Kenneth Rogoff, professor of economics and public policy at Harvard University, and Nariman Behravesh, chief economist and executive vice president for IHS Global Insight, to have been the worst financial crisis since the Great DepressionRead MoreThe Price Rate Is The Best Predictor Of The Future Exchange Rate972 Words   |  4 Pagescurrent exchange rate reflects the future exchange rate. However, this model is questioned, past history of the exchange rate can’t predict the future of the exchange rate so we can say that the random walk model is inconsistent with the technical analysis because it tries to use today’s exchange rate to predict tomorrow’s exchange rate. a. The law of one price (LOP) is a concept which requires that any good should be sold anywhere for the same price, no matter what the currency is. b. Absolute PPPRead MoreSub-Prime Mortgage Crisis - What Caused It ? How Can Us Recover from It?2282 Words   |  10 PagesSub-Prime Mortgage Crisis - What Caused It ? How Can US Recover From It? The recent financial crisis in the U.S. that spread to other countries and caused massive turndown in the global economy had its roots in the recent waves of globalisation. Since the developed countries’ production had shifted dramatically towards services, specially to financial services, and this in turn led to financial liberalizations, developed countries experienced massive capital inflows, lending booms, housing andRead MoreThe Causes and Effects of Global Recession.3720 Words   |  15 Pagesglobal recession. Global financial crisis, increasing for a while, began to show its results in the mid of 2007 into 2008. Worldwide stock markets have subsided, financial institutions have dropped and governments in even the richest nations have had to develop packages to assist their financial organizations. Recession is defined as a slowdown of activities in the economy over a time. The major effect of recession is Inflation as well as currency crisis. A decrease in income may be anotherRead MoreThe World Experienced A Tremendous Financial Crisis Essay1131 Words   |  5 Pagestremendous financial crisis which rooted from the U.S housing market; moreover, it is considered by many economists as one of the worst recession since the Great Depression in 1930s. After posing a huge effect on the U.S economy, the financial crisis expanded to Europe and the rest of the world. It brought governments down, ruined economies, crumble financial corporations and impoverish individual lives. For example, the financial crisis has resulted in the collapse of massive financial institutionsRead MoreThe Current Recessions Impact On The Residential Mortgage Market1514 Words   |  7 Pages RESEARCH PROJECT PROPOSAL 2014/2015 ‘Analysis of the current recessions impact on the residential mortgage market in the United Kingdom’ ROSS TYLER WHITING N0313007 This Research Project Proposal is submitted in part-fulfillment of the degree of BSc (Hons) in Planning and Development Nottingham Trent University, 2015 CONTENTS PAGE 1.0 WORKING TITLE 2.0 INTRODUCTION 3.0 RESEARCHRead MoreFinancial Crisis Of 2007-2008 : How It Happened And Find Out The Reasons1827 Words   |  8 PagesIn my essay I am going to discuss what the credit crunch actually is; how it happened and find out the reasons of it. To begin with I would like to mention what the credit crunch actually is. The financial crisis of 2007–2008, also known as the Global FinÐ °ncial Crisis, is cÐ ¾nsidered by some economists such as Nouriel Roubini, professÐ ¾r of economics and international business at New York UnivÐ µrsity, Kenneth Rogoff, professÐ ¾r of econÐ ¾mics and public policy at HÐ °rvard University, and Nariman Behravesh