Financial Problems
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Financial Problems
A financial crisis is the state’s economic status that leads to thinking that things are not beneficial for the country. The 2007-2009 financial crisis is also called the Subprime mortgage crisis. Major financial crises are associated with panics by banks and other recessions related to the banking panics. The crisis was a result of many causes that contributed to that strategy. Though the crisis ended in June 2009, there were its effects up to the following year. This makes it a great recession since World War II, which was the most severe that led to the great depression. This global financial crisis is characterized by a very significant financial drop in large companies worldwide and the toppling of the market stock selling and earning less profit by business persons. Other factors that contributed to the crisis came from the governments of the top countries in the world. Most countries like the US were affected in their housing marketing that led to people migrating because they could not pay. It resulted in high rates of unemployment because the industries reduced the number of their workers.
The global economic crisis led to the closure of other businesses in the world that was a loss estimated to be worth trillions of money. Complex relationship policies that targeted homeownership and providing home loans easily to people also contributed to the crisis’s rise. It was largely attributed to the American housing market. The housing market prices were highest in the year 2006 then suddenly it dropped more than thirty percent. In the 1930s, the country experienced the largest drop ever. There was a significant increase in the household debts when compared to other decades of the past. In the first four months of 2007, the losses from subprime mortgages showed a possible housing market weakness. The banking major froze the redemption for three funds they had greatly invested in (Flannery & Nimalendran, 2013).
A year later, Lehman Brothers’ bankruptcy was a shock for the world financial markets that led to banking establishments to cease lending money. It caused a lot of concern resulting in changes in monetary policies in the US. The country restricted the monetary policies leading to a detrimental effect on the economic status of other countries. The US government came up with better and effective financial regulations that contributed to the crisis. Most of the Lehman Brothers’ investments were on the subprime and lower-rated mortgage markets. These led to the sell-out of their company at about six billion US dollars. The company avoided borrowing because the credit was hard to repay (Kenc &Diboogglu, 2010).
The word recession had a huge impact on the financial crisis for both the developing and developed countries. There were very many unemployed people in the US because the industries stopped recruiting people. There was a drop in consumer demand for the products produced because their budgeting changed as they ventured into saving more money for later use during hardship times. Many industries suffered, resulting in closing their activities. The government was forced to support other industries financially to keep them running during the financial crisis period of 2007 and 2009.
Australia had a severe financial recession in the health sector. It had few debts, and their economy was reliable because they had reliable trade terms that favored their trading. A study by Beber and Pagano records that Australia’s economy during the financial crisis in the world was to help the country survive and be least affected by the crisis. Glenn Stevens drew the attention to perfect financial positions. These changes in the economy contributed to making the country self-reliant to face the economic uncertainty worldwide. The existing strength of the Australian government finance proved to be the main factor that shielded the country against the world’s future economic uncertainty.
The UAE was not much affected by this global financial crisis as other countries. Mr. Kevin Rudd delivered their budget during the crisis in October 2008 with the main target of keeping inflation in check. Australia’s government announced to give bank deposits, thereby promoting business with an economic stimulus of ten billion US dollars. The money was meant to cover payments for seniors and families to help them throughout the period of the crisis. The economic status was delivered before the Christmas season, and families were now to care about their personal finances. In February, Mr. Kevin introduced the second economic stimulus that had a larger impact than the other one. $47 billion was allocated to boosting the Australian economy. Countries should learn from Australia how to manage money to ensure the economy is stable through the world’s economic status. The government should develop strict policies to keep the economy sustainable throughout.
References
Flannery, M. J., Kwan, S. H., & Nimalendran, M. (2013). The 2007–2009 financial crisis and bank opaqueness. Journal of Financial Intermediation, 22(1), 55-84.
Anderson, R. G., & Gascon, C. S. (2009). The commercial paper market, the Fed, and the 2007-2009 financial crisis. Federal Reserve Bank of St. Louis Review, 91(November/December 2009).
Kenc, T., & Dibooglu, S. (2010). The 2007–2009 financial crisis, global imbalances and capital flows: Implications for reform. Economic Systems, 34(1), 3-21.