Essay Of Economic Crisis

The Global Economic Crisis Essay

In the late 2000s, the World suffered from a big global economic crisis which caused “the largest and sharpest drop in global economic activity of the modern era”, in which “most major developed economies find themselves in a deep recession”, according to McKibbin and Stoeckel (1). Because its consequences have a very big impact to the whole world, many economists and scientist have tried to find the causes of the crisis; and some major causes have been emphasized are greed, the defection of the free market system, and the lack of prudent regulation and supervision. This essay will focus on the global imbalances, one of the most important causes of the current economic crisis.
Many researchers have pointed out that the global imbalances are the root of the recent financial crisis. Portes claims that “the underlying problem in international finance over the past decade has been global imbalances, not greed, poor incentive structures, or weak financial regulation, however egregious and important these may be.” (2). According to him, the global imbalances lead to “the increasing in dispersion of current account”, which “puts a burden on financial systems to intermediate.”
In 1996, the US current account and emerging market plus developing country current account were each about zero. In 2008, US current account was in deficit by $ 600 bn, the emerging market/developing country current account in surplus by $ 900 bn. (sect. 1.1)
Moreover, the global imbalances also make capital flowing incorrectly, from developing countries to advanced countries, from advanced countries to other advanced countries. This makes developing countries with fast productivity growth show capital outflows and vice versa, leads to the surplus of developing countries, and increases the rate of deficit of developed countries. For example, China, a developing country, has been considered as one of the countries with biggest surplus for a long time, while the US, on the other hand, the developed country with highest rate of deficit. In general, the developing and developed countries together make a financial ecosystem that when a member problem, the whole system will be collapsed rapidly. McKibbin and Cagliarini gave a good example here:
Rising demands from China (and, to some extent, India), plus a booming world economy saw commodity prices rise across oil, minerals and food from late 2004 to late 2007. The shock to the global economy from this commodity price boom was as big as the first oil shock in the 1970s. (qtd. in McKibbin and Stoeckel 5).
As a consequence, the global imbalances contribute...

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Financial crisis

Financial crisis is a topic which interests greater number of students every year. This topic is relevant for the present days. That’s why students choose to write an essay about financial crisis at universities or colleges. The benefit of writing a basic essay about financial crisis is that the writer is actually living in times of its happening. That gives him a chance to present subjective opinion of the current situation from financial and economic point of view of certain countries.

Writing an Essay about Financial Crisis

  • Essay Outline. Essay about financial crisis should outline the main reasons of the crisis in the country, its negative effects on the economic growth and society well-being. The next step is to present potential ways how to predict and prevent possible crises in the future according to essay basics structure.
  • Past two decades were famous for a number of financial crises in all the economy of many countries worldwide. As a rule, every crisis is followed by economic recessions, and sometimes effect it makes is absolutely devastating.

  • The crucial nature of crisis in financial sphere is a topic that interests many researches. Economists try to analyze the reasons and mechanism of the crisis, predict possible ways of its development and evaluate the damage it will cause.

  • One of the research aspects is comparing crises in different countries and trying to create a plan for avoiding their negative afterwards effects.

Focusing on Financial Crises Details

There are different mechanisms of the financial crisis development. Every country has some peculiarities, but there is a specific pattern for describing common periods of financial crises.

  • Collapse in asset prices, plunge in capital flight and bank-credit.

  • Boom in asset prices, investment, bank lending and capital inflows.

 

Causes of a Financial Crisis

  1. Banks lend people more money than they can afford to take. The reason why this happens is that there is very low possibility that all depositors will ask their money back at the same time. If this happens, the banks will definitely fail.

  2. An employment of “fractional reserve” policy by banks takes place.

  3. Fiat money and fractional reserve banking allows banks to access “free” money. At the same time it makes government to appear to be “generous” by giving over-promising of social welfare.

  4. Financial crises have the roots in the easy credit expansion. It creates the financial “boom and bust” cycles.

Solutions for a Financial Crisis

  • Reinstitute the money that are backed by real commodities. Ideally, all currency should be backed by gold, as gold is the only money that evolved
    over time. It is important to understand that gold and silver is money for market when fiat money are for government.

  • Abolish fiat money.

  • Start abolishing all central banks.

  • Let private banks issue 100% of money backed by gold.

  • Take the issuance of money away from the hands of government. Different kinds of manipulations will be made as long as they have a control of
    issuance.

  • Make gold a global currency. It will prevent the government manipulations.

  • Have free-banking, 100% gold backed monetary system. This solution will attack the problem at the root and save the national finance from further
    crises.

These are possible ways of solving the problem of financial crisis if at least one action from this list can be successfully done, all the countries will feel remarkable improvement.

Writing Tips

There are several important aspects you should understand writing essay about financial crisis in accordance with essay basics.

  1. Review how the current financial crisis has catalyzed an array of responses.

  2. Search for financial crisis’s causes.

  3. Clear understanding of financial crisis cause will help to provide suggestions for finding a “remedy”.

  4. Array responses should also include reworking regulations and scapegoating.

  5. Review the possibility of massive capital injections.

  6. Narrow down the topic and review one industry that financial crisis has influenced the most. (For example, how the financial crisis has affected
    the automobile industry?)

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More and more students want to explore the topic of financial crisis in their essays since it depicts the modern days. It is the most common reason why students submit their writing tasks at colleges and universities on such a topic. One of the benefits of exploring financial crisis in the essay is that a writer is well aware of all details since he/she lives in the times when it occurs. In such a way, the writer can present a personal perception of the crisis and its causes as well as offer possible economic solutions when referring to a country he/she lives in.

Creating an Essay about a Financial Crisis

  • Write an outline of the essay. Usually, an essay about financial crisis should present the key causes of the crisis that takes place in a certain country, its negative influence on the economy sector and people in general. Moreover, writer has to present possible ways to predict the outbreak of the crisis and evaluate the future outcomes.

  • The last century is known for numerous financial crises that negatively influenced the economy of many countries on a global scale. In general, every crisis provokes the recession in economy, which leads to detrimental and drastic changes in the life of the country.

  • The essence of the crisis is the topic that many economists and financial experts discuss. They try to evaluate the causes and development of the crisis, predict future results and damages.

  • More and more researchers in numerous countries work in the field of crisis prevention and introduce plans for eliminating devastating effects of the crisis.

Details of Financial Crises

There are numerous aspects that contribute to the development of the financial crisis. Undoubtedly, they are different for every country, but still there are common patterns as well.

  • Increase in the capital inflows, bank lending, investment, and asset prices.

  • Deterioration in the capital flight, bank-credit, and collapse in asset prices.

Reasons of a Financial Crisis

  1. People borrow more money from banks than they can afford. The bank is bound to failure if all depositors ask their money back simultaneously, which happens very rarely, but still is seen in the modern days.

  2. Fractional reserve
    policy is introduced in the employment sphere.

  3. Fractional reserve banking does not prohibit to access free money. Thus, the government seems to be too generous since it funds numerous programs and promises to improve the life of ordinary people.

  4. The most common reason of financial crises is the easy credit expansion, which provokes the outbreak and boom cycles.

Possible Solutions to the Financial Crises

  • Back-up the money with real commodities. All monetary savings should be backed by silver or gold since precious metal will always be invaluable. There is a need to realize that silver and gold are money that are of high interest for the market, whereas fiat money – for the government.

  • Eradicate fiat money.

  • Begin eradication all central banks and their institutions.

  • Establish a rule for private banks – money should be 100% backed up by gold.

  • Do not allow government to interfere in the banking process. Usually, governments make the unfavorable manipulations with issuance money.

  • Establish gold as a global currency in order to predict possible government moves and manipulations.

  • Introduce free-banking system supported with gold. Such a step will predict possible crises and eradicate the essence of the issue.

The steps presented above are possible ways to cope with the global crisis and improve the economic situation in certain countries.

Hints for Writing an Essay

There are certain rules students have to realize when they are given a task to write about a financial crisis.

  1. Read the responses of ordinary people and scientists on the matter of crisis.

  2. Find information about the causes of financial crisis.

  3. Understanding of the crisis roots is very beneficial while presenting possible solutions to the issue.

  4. Check whether there is a need of massive capital injections.

  5. Check responses about government interference in the banking processes.

  6. Do not forget to narrow down your topic to a specific field or industry that was affected by the crisis. For instance, how the financial crisis influenced the food manufacturing?

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