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2008 Economic Crisis
A sub-category dedicated to the economic crisis that has affected us all
810 Questions
In a sense that in a society , the prosperity should be distributed uniformly among
society's members, it is needed. But in a prospect of efficiency, it has a effect of
lagging it back
What is it called when a recession continues for a long period of time?
If it goes on for a long time and no one buys a lot of stocks, it could eventually turn into a depression.
Save
Scope and importance of managerial economics?
Business managers need to know about macroeconomics because firms operate in and are influenced by the behavior of the overall economy. Factors such as interest rates, employment, inflation, money supply, etc., affect the business environment and financial conditions in general, so firms must address macroeconomic issues in their planning and management strategy. Macroeconomic forecasts and strategies are more important for large firms than for small businesses.
Why is there a financial crisis in the US?
I agree with many of the s to this question. The "root" cause for this financial melt down is "GREED." Money has never been the problem. It has been the love of money. Because of this greedy love for money organizations that lacked morals began creating lending programs, fraudulently inflating property values and even committing mortgage fraud to get people qualified that could not afford to buy.
What causes me more worry for me is that our government thinks that the solution is to give the banks more money to get more people to borrow.
Here is a Fact...
If the nation is incapable of paying their debt today, what make us think that consumers will be able to re-pay even more debt in the future? The key to resolving this problem is not loaning more money. It is teaching and empowering the nation's consumers to get debt free. People need to learn how to be GOOD STEWARDS of their money.
Let us focus on helping one another to make the right decisions and get out of this mess.
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The Mortgage problem is the result of corporate greed run amuck. And the damage caused in the '90s by changing banking regualtions is small change compared to the fleecing of the middle class with the tax code. That's why they can't pay a mortgage.
See: How has the Income Tax contributed to the economic crisis of 2008?
and: What is the main cause of the current economic crisis in the US?
:Basically what happened is that in the late 1990s the Republican Congress did away with a lot of regulations in the financial industry that had been put in place in the 1930s during the Great Depression. Without these regulations, it became easier for a lot of questionable banking and lending practices to take place. Lenders started making money by giving out mortgages to people they knew or should have known could not actually afford the houses they were buying; the lenders assumed that housing prices would continue to rise, so in the case of foreclosure the lender would still make money.Millions of people ended up in these kinds of mortgages, called subprime mortgages; knowingly or not, these people ended up not being able to repay their mortgages. At the same time, housing prices started to fall. So imagine this: you buy a $500,000 house with mortgage of $475,000 and a down payment of $25,000. With the initial interest rate, your mortgage payment each month was only $400. But then interest rates rose (and these people had mortgages with adjustable, instead of fixed, rates on them), and so your payments went up to $600 or $800. The problem is you don't have enough income to pay that each month, so you can't afford to make your mortgage payments. Meanwhile, the value of your house falls to $400,000. That means that, even if you sell your house, you will still owe the $100,000 difference. The result of this is that people in this situation go bankrupt, and the lender ends up owning the house.
This problem has happened millions of times in the U.S. but also in other countries where the same lax practices were taking place, e.g. Spain, Canada, the U.K., etc.
Lenders that gave out too many mortgages of this type then found themselves having a lot of people not be able to pay back their mortgages. The lender then ends up with the foreclosed house, but it can't sell the house for very much because housing prices are falling. This means that the lender has lost a LOT of money on the one house. If banks loose $200,000 on a million homes, that's already $2 billion in lost money.
This is all simplified, of course.
The other problem is that these mortgages were being bundled into investment opportunities that companies like Lehman Brothers and other companies then sold shares in to investors. All these people are now also loosing their money.
The results are that bank in trouble don't have enough assets to stay in business; the problem is so massive that only government bail-outs can keep the banks in business. Because so many banks have so many bad mortgages, which are a kind of loan, so they have bad loans, it's hard for any bank to offer credit/loans for any reason right now--they just don't have enough cash to cover everything.
The problem then turns to businesses: small businesses rely on credit to expand, make payroll, etc., and without credit business starts to shrink, jobs are lost, and the economy overall tanks because no one can get any credit at all, so the economy is being forced to switch to a cash economy: if you don't have the money already, you can't buy anything.
The fundamental reason: Financial Leverage was misused to manipulate markets for decades. Organizations were never regulated and compelled to hire more ethical traders and managers rather than B-School MBA Grads who have just learned to make money at any cost. US officials while rescuing the global giants claim it is just a real estate correction due to bad debts in banking system. Whatever the case, the market sentiment have changed forever, and valuations will come under immense pressure from now on...be it real estate, equity, debt, bond, products, services, or...anything
A man jumping from top floor out of a 100 storey building can feel flying with joy until his reaches the ground floor with a big bang. This is the case with most inflated companies and their greedy management, we only know when they actually burst. We should watch and regulate them starting from their intention to climb that building from ground zero!
Some Food for Thought: The golden rule is "do not expect the market to behave and act for your profit". They are playing for their own profit. Win-Win is only a term used to convince or induce not-so-smart investors. There will still be a bunch of guys who have profited from these crashes. After all, nobody is throwing money into the Atlantic Ocean, if you lose someone else gains. Unfortunately, incentives for playing smart (mostly doing bad) are huge and accepted by legal systems, regulators, government and modern society at large.
American Debt They have been spending money that doest exist. they have now spent so much that the collateral they put up wont cover the debt. and in order to keep spending, even modestly, they have to loan more money, the lender knowing they are unable to repay are nervous about lending the money. as a result the organizations that provide work cant get the finance they need to continue and end up having to put people of. This has a snowballing effect. For instance America has been buying cheep goods from China for years with American money. and china has been lending it back to them and making interest on the deal. If the US dollar losses value then the Chinese will have to ask for higher interest in order to recoup for Chinese imports into the US. The tentacles go every where. For every dollar the US owns They are about 200 dollars in debt.The price of self regulation, human greed and corruption.
How Global financial crisis affects in IT industry?
IT helps rather to uplift the economic crisis not to make it worse..so its rumours to say IT has been afftec by economic crisis. IT helps rather to uplift the economic crisis not to make it worse..so its rumours to say IT has been afftec by economic crisis.
Mixed economy is an economic system in which both the state and private sector direct the economy, reflecting characteristics of both market economies and planned economies. Most mixed economies can be described as market economies with strong regulatory oversight, and many mixed economies feature a variety of government-run enterprises and governmental provision of public goods.
Economies ranging from the United States to Cuba have been termed mixed economies.
When did the economic crisis in the US start?
The crisis is a combination of bad laws and greed.
The CRA (Communitty reinvestment act) required banks to make loans in areas that they dealt in despite an ability to find people willing to invest in these areas with good credit. A percentage of all loans had to be in areas that were where the bank did business. There was no mitigation for a lack of people willing to invest in that area. This started in 1978 under Carter.
The second issue was when President Clinton removed the ability for banks to require legal income and verification. This caused banks to make loans to people with questionable income.
The bankers looked at the situation and said "Ok, we are taking the risk, let's get compensated for it". The rates for these loans went crazy high. Washington spent years ignoring this issue despite watching iit become larger and larger. Interest limits were raised to allow even higher interest rates for bad loans.
The ONLY President to suggest a solution to this issue was President GW Bush. His idea was shot down before a democraticly controlled congress. He later has been blamed by them for not stopping the issue.
The problem becomes worse when we give these corporations even more of our money and creating even more debt. In the past 100 days, we have added to YOUR debt over $3000.00 as an individual. That is your portion of what we have give these companies. The debt service is similar. You now owe $3000.00 a year ininterest on your portion of the governments debt. This will cause this recession to last even longer then it would have had they allowed the system to work itself out.
It should depress you that your government cares so much about these corporations that they are willing to mortgage your future and continue this recession. They caused it by over regulation. They can solve it by letting the system be allowed to work without their interference.
When will the US economic crisis end?
We are lucky to be able to look at the past and see what has happened before to our economy and country. The great depression itself started in 1929 but by some estimates ended in 1933...There was a second recession in 1938 so some say that the Great Depression lasted from 1929 to the early 1940's however most scholars really put the end of most of the fundamental problems halted in 1933. So in a sense the greatest depression in the history of mankind only lasted 4 years. We are facing a crisis that many are quick to label the greatest danger since the Great Depression but is FAR from it.
When the Great Depression occurred economists had no real basis to compare that economic crisis. And because of that they advised many policies that inflamed the situation more. They also made great suggestions and policies that helped the country out of that Depression. Our current Economic Crisis is not much different from the Great Depression or all the other recessions this country has faced (roughly one every decade). We are in FAR better shape and we also have the benefit of proven policies that WORK and we know what does NOT work. I dont have any doubt in my mind that this recession will not reach the scale of the great depression, neither in terms of economic loss nor in terms of length. No one can tell but I'd say the worst hasn't come and next year will be our worse year yet. However within two to three years we will be back on the rise and within 5-7 we will be back at pre-crisis times. Unemployment will never hit 30% again like it did...although I think at maximum it could hit 15%.
There are always industries that thrive in economic crisis's and just because the majority of people are doing bad doesn't mean you have to.
What are the various objectives of a firm?
Besides maximising profits,
- maximise growth of firms by increasing sales and market power
- maximise welfare by having more managerial power, larger office space
- achieve their mission: donation to charity, cut down on disposables, encourage recycling
long run survival of the firm
entry prevention and risk avoidance
Economic productivity has declined in some countries as a result of what?
Economic productivity has declined in some countries due to low demand and increase in the rate of Inflation.
How do gas prices affect families?
Gas prices effect families because as gas prices go up the economy is going down. This causes job losses no businesses and you may even have to give up some of your freedom to help your families.
Which economic system is the best solution to handling a crisis of epic proportion?
NIMS (National Incidence Managment System) also known as FEMA.
When there is a natural disaster, emergency crews (fire department, ambulance, police etc.) is usually the first help on the scene to help people out. Socialism system offers the best solution for handling emergency situations because the government takes care of paying the people who work there so everyone can focus on helping the people in need. Being a not for profit organization means that everyone doing what they are supposed to and looking after injured people's best interest. Socialism in it's perfect form (which rarely ever happens) seems to be the best economic system because it teaches people how to share things with your neighbor and to help out on the time of need.
What is the starting point of recession?
First of all we have to think why this current economy crisis raised. simple answer will be this: because of having more consumer than production. Now main question is coming why it is happening? because people are not understanding what really means job and develop. people thought that job is someone who sit on the table and work without getting dust on your hand. and people thought that rising numbers of such a people in country are developed. so, most of the people around the world caught on this unrealistic appearance. they never considered that doing a farming in the field are best job and they never considered its develop country where all the people are engage in farming. if 50% of people consider that agriculture is important and work on it, there wont be any starving situation around the world. and its full proof of recession.
What does absolute poverty mean?
The state of condition of having little or no money, goods or mean of support.
What are current political issues in the Philippines?
the death of the former president- Ninoy Aquino
He was assassinated at the Manila International Airport upon returning home from exile in the United States.
Despite a convoy of security guards (all assigned to him by the Marcos government), a contingent of 1,200 military and police personnel on the tarmac, three armed bodyguards personally escorting him, and a bulletproof vest Aquino was wearing, Aquino was fatally shot in the head as he was escorted off the airplane. From the airplane, aviation security personnel were seen firing into the body of an unknown man dressed in blue, who was identified as Rolando Galman. Aquino's body was quickly loaded into a van and sped away.
Which technological forces will impact marketing the most in the near future?
The near future changing marketing landscape is very much here:
Go-to-market, or GTM, is a critical aspect of any business. It's the strategy and tactics a company uses to successfully introduce a product or service to the market and achieve its desired sales and revenue goals.
The first step in developing a strong GTM strategy is market research. This involves understanding your target customer, their pain points, and the competitive landscape. This information is crucial in determining the most promising market segments and channels to target.
Once you have a solid understanding of the market, it's time to focus on product development. This includes fine-tuning the features and benefits of your product or service to align with the needs of your target customer.
Distribution and promotion are the final pieces of the GTM puzzle. These efforts focus on getting your product or service in front of the right people, through the right channels, at the right time. This may include working with partners, utilizing digital marketing, and creating a strong sales team.
In summary, Go-to-market strategy is about identifying and targeting the most promising market segments and channels, and then developing and executing the most effective tactics for reaching and selling to those customers. By following these steps, your business will be well on its way to achieving its desired sales and revenue goals.
Importance of opportunity cost to individuals?
Importance of Opportunity cost to an individual are :
1. It influences the individuals household in decision making among his numerous wants.
2. It helps the individual to know how to maximise his satisfaction from his limited resources through drawing scale of preference.
Importance of Opportunity Cost to Firms
1. It helps a firm to decide to use labour intensive instead of capital intensive method to achieve the highest output.
Importance of Opportunity Cost to Government:
1. It enables the government to maximize the welfare of its citizen by choosing the right projects it should spend its scarce resources on.
How has global recession affected America?
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Definition of economic crisis?
The global crisis occurs when people aren't buying enough goods and services. This then puts business in a bad situation because the demand for goods and services are down and people are saving their money instead of spending it. It's basically when a recession happens and the crisis is that the economy is not coping and business isn't coping. People need more money so that's why the government gives out stimulus packages of money so people can buy goods and services and the economy picks up.
What is the impact of current global crisis to the economy of developing countries?
Developing countries are ones whose economies are in the developing stage. They are in the growth phase. Much of their revenue is through export to developed countries like the US, UK etc.
When a super power like the US is reeling under a crisis, the plight of developing countries is worse. Their GDP's would come down, unemployment, high inflation, lesser industrial production, lesser per capita consumption etc are some issues that would be faced by such countries.
What is meant by non convertible debentures?
A debenture is basically an unsecured loan to a corporation. Often there is a provision to exchange this debt for corporate stock. Non-convertible debentures do not have this provision.
Non Convertible Debentures are relatively safer than stocks. In case the company winds up, claims of NCD holders will be superior to those holding other unsecured assets of the company such as stocks etc. In fact NCDs can be considered to be safer than Company Fixed Deposits as well.
What are factors that affect economy?
Factors like political unrest,natural calamity, availability of raw materials affect a business. While in the former two, the business house has little to do and watch helplessly and wait for the outcome. Shortage or non availability of raw material can be overcome by import,which will add to the manufacturing cost. Even ups and downs in international financial markets have repercussion on domestic market. The exporters sit idle for lack of orders and the importers are to pay high import duty for exchange rate fluctuation.
What are the effects of economic crisis?
1. Stock market crash. People loose a lot of money. 2. Business shows down. 3. Some people can't pay off their loans. There foreclosures and bankruptcies. 4. Banks have incurred huge losses. Their earnings came down. 5. Financial institutions have gone bust or have been taken over by bigger organizations 6. The housing prices have plummeted 7. The liquidity in the financial system has come down etc.
