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The global finance crisis

Before the 2008-2009 global financial crisis, there were strong warning signs of an imminent disastrous global financial crisis, including mortgage rates and credit bubbles in several nations, as well as many developments of influential crisis warning voices. The financial crisis revealed structural weaknesses in both the economy and the financial system. This vulnerability contributed to the severity and spread of the crisis, although it did not actually cause the crisis incidents to occur; moreover, the consequences were as a result of this weakness (Hawley, Kamath, & Williams, 2011). The inherent weakness and cause are the two components that comprise the financial and economic crisis. Underlying vulnerability is very predictable always but it is very hard to forecast the trigger and timing of the crisis. Although Macroeconomics predictors which include unprecedented rise debt in private sector and low period of interest rate are generally linked to the financial crisis. However, microeconomic predictors might give critical information than that captured by indicators of macroeconomics predictors. Mainly of this microeconomics indicators includes systemic risk measures, liquidity, and profitability, financial ratios such as solvency, credit rating, financial analysis, and audit committee.

Unprecedented debt increase in the private segment is mainly the healthiest predictor in the financial crisis. The growth in private sector proportional debt comparative to Gross Domestic Product was coupled by an indicator of underpricing risk and accumulation of unprecedented signal risk rise in real credit before the period of financial crisis. This rise in credit aggregate increase demand visa contends potential output. As inflation and interest rate increases, it leads to economic stagnation of activities. This trend may cause unmanageable indebted if it is not considered by the borrower, leading to endangering financial and economic stability.

Describe some achievements and pending issues in the context of global crisis?

In the context of global issues, the accomplishments and pending issues are as follows; first, the emerged of new risks in many European countries like Greece particularly the sovereign debt crisis. Second, uncertain social and political full swing outcomes due to trend in growth cum inequalities. Third, there is similarity of the financial system at large. Fourth, unemployment decline and job risk sluggishly, mostly among the young population but there is growth in the economy now. Lastly, business status has not returned to the usual level before the financial crisis.

The major lesson learned from the 2008-2009 global financial crisis was to have a reconsideration of policies targeting economic growth mainly the change of formulation approach in conventional policy. Especially, it forced from self-regulating approaches policies were rethink after the financial crisis. The financial crisis leads to streamlining the responses crisis and achieving self-assurance to exact needs from particularly emerging economies in many developing nations than instead of relying on all kind of policies or from one-size-fits policies. Social protection and anti-cyclical macroeconomic function policies with support economy and jobs were strengthened and commendable than the previous crises. Furthermore, the level of unemployment and duration of work benefits increased, and consequently, the misrepresentation and perception of spontaneously higher benefits in worsened market really changed (Marquis, 2013). This changed leads to benefit of cuts in wages and rights, exploitation of social policy from rising in domestic demand, and job protection improvement in enterprises sustainability.

Those outcomes helped in avoiding and averting the second great depression definitely from the anti-cyclical monetary courtesy measures and packages of socially-inclusive financial incentive taken in that year. But there was policy decision shift at the beginning of 2010 that were done without considering factors that triggered the financial crisis. Although there still many hurdles which have not been recovered and still persist from the global financial crisis outcomes. Definitely, there have been some economic inequalities which have not been appropriately properly addressed like inefficient and unequal income distribution because there is no adequate financial progress in the regulation system and stimulus macroeconomic coverage policies have been progressively narrowed to revitalize the global economy (Jackson, 2010).

Are we still in danger of economic and financial crisis today?

Although there is an immense intervention from government as well as implementing different strategies in order to address the crisis, the major inequalities that caused the crisis have not been effectively addressing to prove the curb of occurrence of any other crisis. This is mostly in the ineffective financial system. The strategies and interventions failed to address the causes of crisis but only tackle the symptoms of the crisis. This has to lead the volume of credit in developed economies to remain slow relative to the actual economy of those countries. For small enterprises, this case is very troubling, particularly in the European Union. Many small-sized and medium business are still in a struggle to access the credit system, this is according to surveys which were done on the current state of European Union.

Due to weak enforcement of financial reforms, there has been moral hazard substantial issues that have emerged which are failing financial institutions. This has led to increasingly volatile in the field of financial globalization and flow of global capital in current economic statistics reports due to the unchanged financial system in the global market that previously witnessed (Sirkeci, Cohen, & Ratha, 2012). This has attributed to financial crisis increase in series of trends. There were still a number of crises before 2008-9 crises in the financial field which includes the Latin America and series of the prominent Asian crisis in the late 1990s which triggered mishandling of the macroeconomic system partly and volatilized further capital flows. Government debt has automatically increased leading to a reduction in private debt but still, the financial sector has rational grown beyond the limit increasing non-financial economy (Sirkeci, Cohen, & Ratha, 2012).

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References

Hawley, J. P., Kamath, S. J., & Williams, A. T. (Eds.). (2011). corporate governance failures: The role of institutional investors in the global financial crisis. University of Pennsylvania Press.

Jackson, J. K. (2010). Financial Crisis: Impact on and Response by the European Union. Diane Publishing.

Marquis, M. (2013). Regulating mergers: substantive and procedural issues, judicial review, international convergence and best practices.

Sirkeci, I., Cohen, J. H., & Ratha, D. (Eds.). (2012). Migration and remittances during the global financial crisis and beyond. World Bank Publications.

 

 

September 21, 2021

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