ECONOMIC AND FINANCIAL COLLAPSE

Economic and Financial Collapse

Economic and Financial Collapse

Introduction

The financial crises of 2007 - 2008 are termed as the global economic crisis for financial markets and banking industry. Beginning of the crisis gave a collapse in the market of high-risk mortgages in the United States. By the early 2008 crisis has been global in nature and gradually began to emerge in the general slowing of production, reducing demand and prices for raw materials, rising unemployment.

Causes of the 2007-2008 global economic crises

The crisis began in 2006 reveal a decline in prices of real estate. In mid 2007, the subprime bonds were securities without any coverage. When home prices started to decline in the U.S., two investment funds of the bank Bear Stearns went bankrupt in July 2007. Banks have suffered very seriously, losses calculated in billions of U.S. dollars. These losses were so great that in March and April 2008, the major banks of USA (Merrill Lynch, Goldman Sachs, Morgan Stanley, Lehman Brothers, and Citigroup) have been hastily capitalized to avoid bankruptcy. It was feared that the bankruptcy could trigger a domino effect, bankrupt banks and enterprises, unemployment and economic crisis, was comparable to the crisis of the century from 1929.

The crisis was caused by mortgage loans, which give the banks at high risk of repayment options to people with insufficient funds (called sub-prime mortgage). These loans became collateral structured bonds sold in bulk and speculative investment purposes by private financial institutions, including the largest American and European banks. Awareness riskiness of these bonds was limited because continued growth in the real estate market and the highest rating institutions issue a safety evaluation of high risk bonds. Insolvency individual with unexpectedly high percentage (9.2%) resulted in a lack of cash turn in the credit market and the volatility (risk of impending insolvency claims) of these institutions.

Legal and ethical dimensions of the crisis

This crisis is much more than just economic or technical phenomenon. Just note that the economic crisis is bringing whole families to lose their ground, losing their jobs or leaving them with a salary that cannot cope with the mortgage, many people lose their life support as many lost savings and legitimate earnings of a lifetime. Nobody can deny that the solutions to the current economic crisis go through a regeneration of ethical values, both the individual and institutions. That is, the problem is not just economic. ...