Global Financial Crisis (Essay Sample)

Global Financial Crisis
Nduati Cathreen
University of Nairobi


Author Note
This essay was prepared as a course work, Principle of Economics DBA 304. For more information concerning the paper, contact catenduati48@gmail.com.
Abstract
Financial crisis in the banking sector are conforming to the standards of currency crashes. America’s first crash of 1792 and the world’s biggest slump of 1929 explain the financial evolution trend. Financial crisis refer to a situation whereby the money being supplied in the economy is surpasses by the rate of demand for money (Neel Kashkari). This will leave the banks will no option but to sell their investments so as to make up for the dearth in the banks, failure to which it will cause financial crisis.
Global Financial Crisis
World’s largest economies have been working jointly in arriving at the resolution to economic crises. This unified approach ended in vain as each nation engaged in economic nationalism where each state wanted capital and jobs to be at their own disposal. Economists analyzed this as a suicide grave empowered by political interest, and thereafter, causing depression in the world. However, Walter Bagehot asserts that financial crisis occur when there is flooding of blind capital by the public into speculative investment that is not well calculated.
In early 2013, the global economy was still dragging behind compared to 2012. There were reports that UK was heading to triple dip recession and this showed that Quantitative Easing that the Western governments resorted had no impact on the banking industry because the banks had not issued new loans with this new money.
Global economic crises are still rocking most of the nations and unemployment rate is still high. China has penetrated the market and now has vast trade base and financial surpluses that causes robust economic nations like US and UK to have uncorroborated large debts. According to Angela Markel, the unsustainable large debts of the United State were to be blamed on the unsustainable growth model with the cheap credit and debt given by the US. It is China that is bailing out the West as per now. The debt-fuel consumption could have cause inflation in the US which could have affected the economy of many nations in general. However, the US was emancipated by the Eastern countries which helped her to maintain its wobbling economy.
The US central bank acted in the interest of political big wings that resulted to economic crisis in 2008. This problem is still unresolved fully and can cause another economic crisis (James Gruber, 2014). The Central Bank at Davos suggested that economic crisis is a past tense.
The interest rates being set by the central banks also have a great effect on the economy. When the central banks set low interest rates for long, asset prices will be affected drastically.
There is Banking Union mechanisms put in place to come up with a single central mechanism to superintend and to restructure banks to ensure financial stability in the coming years. The European Commission is also trying to vitalize its regulatory framework for all its 18 Member States that are within the euro area so as to have a stable economy and to boost the safety of banks.
In conclusion, China has a vast trade base that is helping to restore the economy as a whole. The US large credit and debt-fuel consumption is advancing instability of the economic. Therefor...