Current Financial Crisis

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Current Financial Crisis

For economic crisis 2008 to 2011 is known to the economic crisis that began that year worldwide, originated in the United States. Among the main factors causing the crisis would be the high prices of raw materials , the overvaluation of the product, a global food crisis and energy, high inflation and the threat of global recession worldwide, and a credit crisis mortgage and market confidence . The root cause of all crises according to Austrian business cycle theory is an artificial expansion of credit. In the words of Jesus Huerta De Soto "this crisis arises from the fictitious credit expansion orchestrated by central banks, and has motivated entrepreneurs to invest where they should not" (Acharya, 09).

The financial crisis may well become a major economic recession. Indeed, economies are increasingly interdependent, the crisis originated in the United States (countries accounting for 27% of global GDP) can be passed quickly in Europe and Asia by a deceleration of exports (e.g. Germany, the first economic partner of France, which has a high trade surplus in recent years).

At stock, the loss of value of securities linked to the crisis of investor confidence encourages massive sales behaviors that affect the real economy, then a negative real balance effect. The heritage of economic agents has decreased, the effects are felt when the level of aggregate demand is for the real economy. This effect is quite marked in the United States. Investors may also decide to opt out of certain projects, certain geographical areas to rebuild their level of cash balances. The infection can then be quickly and spread to all the world economies.

The recent financial crisis that hit the whole world severely was different in its extent and size however; it was characterized by same feature of the past recessions. This financial crisis was mainly characterized by high availability of the liquidity, low levels of risk premium, fast growth of credit for long time, high levels of leveraging, climbing prices of assets with the progression of bubbles in the real estate sector. The long periods of leveraging state made the financial markets exposed to various market risks and corrections made within the assets market. Due to such situation of the financial markets, the changes in the economic situation of the United States were enough to collapse the complete structure.

To consider great depression as the benchmark due to its financial triggers, it has ...
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