The financial crisis has been one of liquidity. This refers to the ability of an asset to be converted to cash. It is important for banks because if there was a sudden decline in deposits, they need to have cash on hand to cover their reserves. They acquire this cash by selling assets such as investments, securities, or now most famously, collateralised debt obligations (CDOs). CDOs are where the trouble began. Many CDOs were secured (collateralised) by mortgages. When, due to the plunge in housing values, those CDOs became totally worthless (most investors were totally unwilling to buy them), a lot of banks were stuck with them. The value of these assets continued to drop and banks started needed cash to cover it. Had these bad debts been easily liquidated, we wouldn't be in this situation. Now we need to get liquidity back into the markets. Banks are still strapped for cash and we are starting to witness a decline in lending. This causes businesses to have to cut back. This is why we are now seeing an increasing unemployment rate.
Realizing that does not directly the question, we have to ask ourselves "How do we get liquidity back into the market?". That is not as easy as some suggest it to be. Economists refer constantly to the "pushing on a string" analogy when it comes to government policy effects on the economy. It is very very easy for government to pull back on the economy and slow it down or even stop it (pulling on a string) but it is extremely difficult for government to push the economy forward (pushing on a string). Governemnt policies cannot grow the economy very easily. Nor can they solve this crisis easily.
Revoke the charter of the Fed and set up a new national banking system that is constitutional and reflects a sound money policy. Texas Rep. Ron Paul has been trying to get congress to face up to this issue for years.
There are many things that drive an economy, but one certainly is consumer confidence. If people have a belief in future success they will invest their time, energy and capital in ways that will restore the economy to a growth path. Confidence has been undermined in many ways over the last two decades. One of the greatest problems has been the lack of investment in manufacturing in this country. The result has been a loss of what the politicians term "good jobs". A series of articles discusses the problem and things to be considered in a long term solution. Please see the related links below.
Tax cuts! Further reduce individual and corporate tax rates across the board and announce that there will be no tax increases for at least two years. Do this at both the Federal and state levels. This will increase the confidence of individuals and businesses, will increase trade, investment, business growth, and hiring. As businesses and individuals all become more successful, even low tax rates applied to a higher volume of trade will actually bring in more income to governments, not less. When the capital gains task rate was recently lowered, revenue to the government increased!
The crisis is a lack of trust among banks. We still don't know the sleeping dogs. The first step would have to be a total transparency of large interbank loans, similar to stocks. Since banks don't like this, only government can order disclosure of essential loan data. Pouring money into the system does not solve the problem. There is enough liquidity, it is just not being used.
A financial crisis is when wall street and the banks are failing. An economic crisis is when there is high unemployment or a recession.
http://wiki.answers.com/Q/CausesEffects_and_Remedies_of_global_economic_crisis"
While external auditors played a role in the financial crisis of 2008 by failing to identify and report on the risks associated with subprime mortgages and complex financial instruments, they were not solely to blame. The crisis was primarily driven by a combination of factors, including excessive risk-taking by financial institutions, lax regulatory oversight, and the proliferation of high-risk mortgage products. Additionally, the overall economic environment and a culture that prioritized short-term profits over long-term stability contributed significantly to the crisis. Thus, while auditors share some responsibility, they were part of a broader systemic failure.
The United States was the country most affected by the 2008 financial crisis, as it was the epicenter of the collapse due to the bursting of the housing bubble and the subsequent failure of major financial institutions. The crisis led to widespread job losses, a severe recession, and a significant decline in consumer confidence and wealth. Other countries, particularly in Europe, also faced economic turmoil, but the U.S. experienced the most immediate and devastating impacts. The fallout prompted global economic downturns and necessitated substantial government interventions to stabilize financial systems.
Depending on what kind of financial crisis is being described for example; large scale financial crisis such as businesses and communities or small scale such as personal financial troubles. On a personal level not having enough money to live of for necessities is a crisis. For large scale like a community if the economy is bad then that is a big problem as well.
why financial crisis occur why financial crisis occur
There is no exact date for the 2008 financial crisis. A financial crisis is a series of mishaps that happen together to cause a crisis.
John Authers has written: 'The European financial crisis' -- subject(s): Monetary policy, Global Financial Crisis, 2008-2009, Economic conditions, Banks and banking 'The fearful rise of markets' -- subject(s): Global Financial Crisis, 2008-2009, Financial crises, Capital market, History 'The fearful rise of markets' -- subject(s): Global Financial Crisis, 2008-2009, Financial crises, Capital market, History
A committee similar to the Financial Crisis Inquiry Commission (FCIC) would be formed to investigate the possible causes of the financial crisis of 2008. The FCIC was a bipartisan commission created by Congress to examine the factors that led to the crisis and to provide recommendations to prevent similar events in the future.
The process of deregulation caused the 2008 financial crisis.
Holly Dolezalek has written: 'The global financial crisis' -- subject(s): Global Financial Crisis, 2008-2009, Juvenile literature, Economic history
There is no such crisis as the financial bailout package crisis. the bailout was created to overcome the financial crisis.
Costas Lapavitsas has written: 'Financialisation in crisis' -- subject(s): Global Financial Crisis, 2008-2009, Financial crises, Finance, International finance 'Social foundations of markets, money, and credit' -- subject(s): Capitalism, Credit, Economics, Marxian economics, Money, Sociological aspects, Sociological aspects of Economics 'Financialisation in crisis' -- subject(s): Global Financial Crisis, 2008-2009, Financial crises, Finance, International finance
Open market operations.
Steen Thomsen has written: 'An introduction to corporate governance' -- subject(s): Corporate governance 'Understanding the financial crisis' -- subject(s): Global Financial Crisis, 2008-2009
Subprime loans, which were high-risk mortgages given to borrowers with poor credit histories, played a significant role in the 2008 financial crisis. These loans were bundled together and sold as complex financial products, leading to a housing market bubble that eventually burst, causing widespread foreclosures and financial instability.
September 19, 2008 was a financial and banking crisis. Lehman Brothers failed, the government had to bail out AIG.