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Financial Crisis of 2008 affecting the western nations

Code: MOD003325

Write an essay that addresses the following question:

- Could western nations have avoided the 2008 financial crisis?

- Examine potential causes and assess whether they were inevitable

Answer

The financial crisis of 2008 had led to great depression and economic deterioration that hit the western nations. The financial crisis has been referred to as the economic disaster that spread like a disease across the world, thus affecting the lives of the million. The aggressive consequences such as depression, failure, financial instability, lack of standardization fowling the Great Depression of 1929 (Otter & Wetherly, 2008). The Federal Reserve Bank tried to pull up the economic valuation in the western countries mostly in United States. U.S had been highly affected by the collapse of its banking sector, breaking down the local investments, resulting in huge debts, destruction of local banks (Domitrovic, 2012)


As examined, it is assessed that the financial crisis has hit the western countries with Great Recession where unemployment was accompanied by mass labor relocations to other countries. Housing rates resulted in a downfall of around 31.8 percent that again speeded up to 40 percent after two years of the recession and depression period. The countries affected by the great financial fall had collapsed in the economic strata that led to difficult sustainability. The paper explores the study of the Great financial crisis, its causes and consequences on the western nations. The study aims at understanding the causes and the effects of the financial crisis that occurred in the year of 2008, affecting the lives of the western nations, leading to the collapse of eths economic and banking sector. The research attempts to explore the financial dislocation and collapse within the financial and monetary institutions that carets a path of shock and uncertainty, and it could have all been avoided.  


In order to mitigate and avoid the financial crisis the western nations can help in bringing mutual efforts in strengthening its existing policies.  Besides, the people be given loans so that they can afford home mortgages under low interest rates.  Besides, the banks need to put all these mortgages in different package systems similar to credit default swaps. Within the troubled financial times, it is therefore important avoid but not neglect the existing issues. The country needs to plan its policy and budget favorable toward avoiding such crisis. Besides, individuals need to use the minimum or the least accessible things. During such crisis using every minute things and materials will help them in curbing the disputes for a temporary period of time. Government need to provide necessary safeguard against unemployment. 


Therefore, it is  important to provide health, home and employment insurance that provides people with sustainable benefits. As examined, the mortgage lenders who had sold their subprime loans towards the Fannie and Freddie witnessed risks and threats as they asked to sell directly to the recognized banks. It was assumed that the banks need to pump up loans that would help in generating profitable securities. However, this act resulted in moral hazard. It seemed that mortgage lenders started earning profits by selling loans under risk. But the benefit is that banks would be able to sell on these mortgages. The financial and economic crisis system resulted in global destruction and collapse (Lindström and Giordano, 2016)


However, without the positive response of Federal Reserve, international monetary system, the European Bank and the Bank of England, the local and centralized banks, had formulated new schemes and offers towards improving the financial conditions within western nations. As examined, within the year of 2008, it is observed that the central banks had purchased a high amount of government debt and secured both the public and private assets of the banks (Feldkircher, 2014). This was termed as the largest liquidity period within the financial and credit sectors resulting in the effective and fiscal and monetary regulatory action.


With the crash of the stock market, banking sector, economic rates, house pricing and asset devaluation led to the period of the great depression.  The economists and they sociologists had sued several tools and techniques to examine the crisis causes and consequences and cater to the resolution of such global depression and great recession. The Federal Reserve Bank had given out to new ways through which the citizens will be able to secure their money and valuable assets while enhancing liquidity under the Treasure department. The government and the banking sector assessed and measured the liquidity rise and differentiation, credit limitation, credit valuation, loans and debts, insurance facilities and offers, housing market adjustments, in outlining the risks and threats posed due to economic crisis that hit the western nations in the year of 2008. 


The government attempted to launch different programs so that the banks can able to gain their profits to their maxim and reduce the risks at different levels. However, the new policies and system were unable to assess the increase in the global unemployment and relocation of citizens. Nevertheless, the stock markets that faced a huge downfall experience and uplifts due to the new policies and governance under the International Monetary Fund, Federal Bank that granted new offers, schemes, reliable security to the banking and financial markets.


The western housing markets had collapsed due to uncertain hit of the crisis that befallen the sector. It had been observed through the secondary source study, that the housing rates or pricing have been crashed towards lower interest rates and unprofitable income. Besides, there were huge risks and threats that spread across the economic market of the U.S in regards to the housing price economy downfall that was characterized by debts, loans, borrowing, risks, complex regulatory system, misguidance, deceitful behavior among the sellers and loan givers (Grigor’ev & Salikhov, 2009). The banks started taking risks by handing over loans with low interest rates. For instance, the Lehmann brothers had collapsed due to its high investments and loans given to the people taking excessive risks. Besides, the Lehman brothers and U.S local bank downfall, the European market had been destroyed due to the crisis within the European banking sector using the Euro (Buckley, 2011)


As examined, there have been maximum delinquency rates that resulted in quick devaluation of the economic equipments and requirements that involved loan portfolios, credit swaps, mortgage securities, etc. The buyers who had their securities against assets faced liquidity crisis, as the value of secured assets and other properties had experienced a rapid decrease in its security and price due to the de-valuation. It became really difficult for the people, buyers, sellers, banks, local banks, in borrowing and giving money thereby causing bankruptcy and deceitful behavior among the citizens. The study attempts to explore and understand the financial crisis of 2008 through the study of eth secondary sources that include journals, articles, e-books, essays. The paper has been designed in order to introduce the outline of the economic crisis, following the objective of the study following the statistics, graphs in examining its causes and annual data. The research prepares an analysis of eth study of the secondary sources and the data has been assessed in order to gain possible outcomes. The research has been conducted through the helps in gathering essential data through eth application of research tools and techniques. 


The financial turmoil resulted due to the Great Financial crisis and emerging issues within the banking and economic sector. There was a major hit when the Home loan Mortgage Corporation devalued that they would not purchase high risk-mortgages while there were the sectors that were registering bankruptcy such as New Century Financial Corporation. This led to disclosure of confidential data and resulted in housing-price decrement resulting in heavier risks and security issues. The risks delimited the buyers to pay low rates of interest during the second quarter of 2008 (Wetherly and Otter, 2014). However several financial firms and local banks received support from the Federal Reserve by lending the banks with short term-benefits and credit that allowed them to pay the people with loans and reduce the burden of risks. However, the Bank assessed the credit ratings and if the rates were downgraded of any firm, they were not given the facility benefits and facilities. 


There had been increasing demands within the housing sector as the housing prices rose despite the economic factors that led to the global crisis. There was a housing bubble post the year 2008 that resulted in the collapse of regional housing prices. The emergence of the housing bubble led to the imminent disparities and escalation within the housing rates (Grigor and Salikhov, 2009). Lower interest rates have been witnessed since the year of 2004 that again hit hard the financial, market and banking sector from the second quarter of the 2008. Many of eth western nations bank had been increasing liquidity within the credit markets that would foster and enhance flow with low interest rates. As examined, the mortgage lenders who had sold their subprime loans towards the Fannie and Freddie witnessed risks and threats as they asked to sell directly to the recognized banks. 


It was assumed that the banks need to pump up loans that would help in generating profitable securities. However, this act resulted in moral hazard. It seemed that mortgage lenders started earning profits by selling loans under risk. But the benefit is that banks would be able to sell on these mortgages. The lower rates period has been benefiting the banks as it allowed them to sell the assets and mortgages before they would be termed as default. The financial crisis led to credit devaluation in relation to global economic system resulted in global destruction and collapse (Anonymous, 2010). However, without the positive response of Federal Reserve, international monetary system, the European Bank and the Bank of England, the local and centralized banks, had formulated new schemes and offers towards improving the financial conditions within western nations. 


As examined, within the year of 2008, it is observed that the central banks had purchased a high amount of government debt and secured both the public and private assets of the banks (Buckley, 2011). This was termed as the largest liquidity period within the financial and credit sectors resulting in the effective and fiscal and monetary regulatory action. The continuous economic degradation had to led to global issues that were amended lately by the policies and system updated by the government under the regulations of World Bank and Federal Bank in fostering economic balance and equity within the western nations. 


With the crash of the stock market, banking sector, economic rates, house pricing and asset devaluation led to the period of the great depression.  The economists and they sociologists had sued several tools and techniques to examine the crisis causes and consequences and cater to the resolution of such global depression and great recession. The Federal Reserve Bank had given out to new ways through which the citizens will be able to secure their money and valuable assets while enhancing liquidity under the Treasure department. The government and the banking sector assessed and measured the liquidity rise and differentiation, credit limitation, credit valuation, loans and debts, insurance facilities and offers, housing market adjustments, in outlining the risks and threats posed due to economic crisis that hit the western nations in the year of 2008. 


The government attempted to launch different programs so that the banks can maxim their profits and reduce the risks at different levels. However, the new policies and system were unable to assess the increase in the global unemployment and relocation of citizens. Nevertheless, the stock markets that faced a huge downfall experience, gradually picked up due to the new policies and governance under the International Monetary Fund, Federal Bank etc. which granted new offers, schemes, reliable security to the banking and financial markets. 

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