Economic Crisis Research Paper Example | Topics and Well Written Essays - 2000 words

Economic Crisis - Research Paper ExampleEventually, critical valuation of the policies is exercised in order to execute cross evaluation procedure and suggestion of optimal policies are being stipulated in order to strengthen the indemnity implication paradigm. The propulsion of the scotch crisis in 2008-2009 is the devastating economic crisis that the world faced in the past six decades. The crisis was predicted by a host of economists but it was mainly unforeseen. In the World Economic Outlook, the International pecuniary Fund (IMF) even inferred that the threats to the global economy are minimal and for the moment there were no anticipations of any severe economic downswing. The juncture before the crisis was infested with outfit global imbalances but owing to the virtue of the worlds largest capital markets and its stable financial regulation and political stability, they saw the global imbalances with sustainability angle. Apart from that the acclivitous developing countrie s also found a secure place for investing their funds in order to earn a huge benefit so that they could sustain their position and enhance their credibility in the debt market in the long run. The United States was also considered to possess a superior monetary policy institutions and monetary policy and monetary policy making environment. But the world economy was shattered with the launch of the economic crisis and the crisis shook down the roots of the formidable US economy (Verick & Islam, 2010, p.v). The evil effects of the crisis led to the shattering down of the trade scenario of the world economy with the plight of tremendously declining unemployment rate of the developing economies and accompanying rescue efforts of the government. Launch of the crisis The global economic crisis emerged in September 2008 following the collapse of the strong US financial institution, the Lehman Brothers with the result of the accumulation of the defaults on the mortgages and the different ial gear products (Lin & Treichel, n.d., p.7). Immediate impact The financial welkin crisis very quickly led to the significant decline in the credit volume in the private sector as well as sharp rise in the interest rates. The equity market crashed and the real growth rate around the globe declined significantly below the projections and the US along with the developed economies. The only exception was China and developing Asia who maintained robust growth (Lin & Treichel, n.d., p.8). The root causes The microeconomic dimension literal estate bubble burst The primal reason for the outburst of the crisis was the bubble burst in the US real estate market. As the house price falling rapidly in the second quarter of 2007, the growth rate of the prices of the real estate saw a declining trend since 2005. In the late 1990s, the living accommodations prices began to rise sharply and deviated from their fundamental characteristics. Reaching the summit in April 2006, the bubble burst r ose heavily with the tightening of the monetary policy of the Federal Reserve. With signs that the mislead rise in the real estate was coming to an end, the banks decided to issue NINJA loans which were made without any prior income declaration from the borrowers to start paying off debt. With the intensification of the downturn in house prices, the mortgage