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The global Economic crisis
The global economic crisis also known as the Great Recession or the lesser depression is an economic depreciation that is known worldwide. It started in December 2007 and took a drastic depreciation in September 2008. This is the worst economic catastrophe that has been experienced globally since the Great Depression of the 1930’s. For the young generation, used to meek recessions of the current globalization, the hardships of the Great Depression are but a tale to them. On the other hand, the cave in of the two Bear Stearns Hedge funds in 2007 uncovered what is known today as the subprime mortgage crisis, introducing the world once more to an era of private defaults, bank failures and massive layoffs. Today the economies of countries worldwide are interdependent due to the high rate of globalization, thus the crisis was felt in almost every part of the world. “In an Interconnected World, American Homeowner Woes Can Be Felt from Beijing to Rio de Janeiro,” observed the International Herald Tribune at the onset of the crisis
Even though a few people foresaw this financial crisis, almost every person can give an explanation to what caused it. To economists, it looks devastatingly simple. There was too much money flowing into the American economy especially from the Asian country of China. This made it easy for the citizens to borrow money to buy properties even if they couldn’t afford it. The bankers put together these loans and sold them out to investors who did not understand the complications of these loans and the risks related to them.
The citizens who had taken loans began defaulting and did not pay up their mortgages. Their houses were confiscated and those who had invested from around the world, including banks lost their investments. For the critics of the Bush administration, the government had failed to control the actions of the banks. To Fed’s critics, this crisis was as a result of Alan Greenspan’s plan of low interests rates for a long period of time. From the nature of the crisis, it is expected that that many explanations will come up, yet the cause of this great financial recession might just as well be a fundamental human feeling: greed.
Since mid 2008, the world has known the greatest ruin of wealth. There is no industry in the world that was not affected. The financial bigwigs of Bear Stearns and Lehman Brothers went bankrupt and mortgage powerhouse also had to be bailed out. An attempt by the government to save its industries left an increase in the budget debit, resulting in some experts predicting a change in global power from the US before the crisis ended. It also became clear that the Asian countries needed to rebuild their home economies to encourage expenditure. What started as a local crisis in the US of excess borrowing, ended up affecting the global economy.
The time for the rescue is in doubt, and the sureness of its worth is questionable. Historically put, there is no agreement whether the government spending rules by Franklin D. Roosevelt or the increase in goods demand due to the Second World War removed the US from the Great Depression, however, one thing for sure is that there is no local solution to a global problem.
