Essays Economic Crisis 2008

A crash is a situation in which price of assets are conflicting and hence customers will only proceed with the purchase if they expect other market participants to purchase.In such an event, a large proportion might decide to sell causing a fall in prices.

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Nature of the crisis Firstly, the great recession has a direct link with the major banking crisis witnessed during the period.

Bank in the entire United States were suffering massive and rapid withdrawal of financial by depositors; a phenomenon known as a bank run.

This state of affairs is the balance of payment instability or a currency crisis.

In case the state is unable to settle its foreign financial debt, this phenomenon is sovereign default.

Financial instability directly leads to a great loss of paper affluence but hardly result in adjustments within the real economy (Dwyer, 2009).

Different economists and scholars often offer hypothesis about how financial instability grows and how to prevent the undesirable condition.The third characteristic of the great recession was the international financial crisis.For a country that uses the fixed exchange rate, a situation may arise when the financial sector is compelled to devalue the currency of the nations to accommodate speculative attacks.The paper also addresses the fine details of the crisis highlighting on some issues such as; questions of who was responsible for the undesirable financial condition.Some basic theories relating to the cause of the challenge.Some economists and scholars insist that bubbles never experienced during the United States during the recession.However, all indications show that the situation was almost getting to that level (Nanto & Library of Congress, 2009).Secondly, the 2008 crisis was characterized with speculative crashed and bubbles.Witnessing of a speculative bubble is during an even of massive, sustained and persistent overpricing of various classes of assets.The public policies applicable to deal satisfactorily with the identified causes.Some steps taken by congress and Obama government to deal with the matter, and lastly whether the adopted measures were effective or not.


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