Global Financial Crisis: Causes and Impact

1Introduction financial crises have intervened the operation of financial markets over forms. closely observably the great depression in 1929-30, the 1970s fanfare crises and the banking crises in the 1990s created havoc in the financial markets make toilsome disruption. The current financial crisis which emerged in 2007, although the roots were set more than earlier, has been one of the toughest and probably the biggest that financial markets have forever encountered. Referred to as the credit crunch, the impact of the crisis has not only been on the banking area but on the real economy as a whole potentially leading to long and thick-skulled recession. 2Causes of the Financial CrisisNumerous accounts have been made to explain the causes of this great financial disaster. at that place are a number of compound factors that has resulted in the outbreak of this financial crisis of enormous proportions. Collapse of the US lodging market, passing leveraged financial transa ctions and a showtime relate array encouraging borrowings, among others, have all contributed to the downswing in the world-wide financial market. Let us now aroma at these various causes in greater detail. 2.1Low Interest RatesFollowing the violate of the compass point com bubble and the possibility of recession looming the US government started cut down the interest grazes to boost up the economy.

The interest rate became as low as 1.5 per centum in June 2003 which was at its lowest level since 1958 (PSB, 2007). This low interest rate implant its takers in the form of home buyers and borrowers with the h ousing market finally showing some growth ! aft(prenominal) years of declining trend. In fact the rate of a 30 year better rate mortgage in the year 2003 was the lowest in forty years and so the hallucination of owning a menage in US was becoming a very well-to-do reality for a... If you want to get a full essay, methodicalness it on our website: OrderCustomPaper.com

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