The financial crisis of 2007–2010 is called to be the worst since the Great Depression of the 1930s. Many causes have been proposed years ago, only the dimension remained questionable among leading economists.
What were the reasons for that global collapse? Let us have the cartoon speak for itself:
Just for reminding – the five most responsible facts a bit more precisely:
1.) Growth of housing bubble (Many homeowners refinanced their homes at lower interest rates by taking mortgages) 2.) Easy credit conditions (Encouragement to borrow money by lower interest rates) 3.) Sub-prime lending (Making loans that are in the riskiest category of consumer loans) 4.) Deregulation (Simplification of government rules which constricts the operation of market forces) 5.) Predatory lending (As the name implies: unfair, deceptive practices of loaning money in the hope the consumer will default and the lender will be able to take the collateral)
How did President Obama react on that global crisis? Could we expect a CHANGE in the World´s fiscal policy?
…the answer is given in the following video – have a look at it!!
Summary:
-> central banks shouldn´t be able to take great risks on their own -> growth of central banks should be bounded -> investment banking should be treated separately to all other financial affairs Consequence on Obama´s latest financial plans: The Dow Jones Industrial sank 1.1% last Wednesday (20.01.2010) and 2.0% on Thursday! CHANGE concerning fiscal policy? It SEEMS there will be a tiny change concerning fiscal policy with the help of greater control of central banks. But in my opinion it´s too early to make a forecast to the future! We will see what the following months will implicate!
Advertisement
Quite, except that this deregulation things is misunderstandable … markets are great regulators … you see a cockroach in a restaurant once and you’re likely to patronize another, even without health inspectors. And the kitchen, where no guest would look? Trust that absent other compulsory agencies private voluntary quality seals would have emerged.
Equally, if mark-to-market and the proof of financial profitability of investments over their full period of being held were in GAAP or IASB rather than state regulations weakening auditing standards and allowing mark-to-myth then no crisis through maturity mismatching would have happened, no bonuses been paid.