5 Reasons Every Person Must Know Behind Recent Global Economic Crisis

About Recent Global Economic Crises:

It is actually an ongoing 2007-2012 global economic and financial crisis having multiple factors directly or indirectly involved. Economic, political and organizational interests have played a main role in giving rise to these global crises.
This global financial and economic crisis generally seems to have affected few areas only, but on a close look, you will find everyone becoming a victim of this crisis. It has large effects on a common man. Many workers of massive companies have been bankrupted and many have become unemployed. There is an overall decline in every business.

Photo Credit Walworth County Today

Some major reasons include:

1.Failure of Toxic Mortgages:

One major reason of this global economic crisis is the failure of toxic mortgages in US.

Some risky mortgages were actually packaged with few secure mortgages and were then sold as secure investment products to many banks and other corporate investors. This has given rise to a lot of risk. This packaging and selling of risky material has got adverse effect on people belonging to different fields. Investigation was carried out afterwards to search for the actual culprits, but on the whole bankers and politicians are to be equally blamed.

The frequency of national debt of U.S. has considerably increased in past few years. U.S government is still trying hard to recover the consequences of this crisis. This will take a lot of more time and effort to bring everything back to its ideal state.

2.International Trade Imbalance:

International trade imbalance and dependence on short term funding markets is another major reason of these crises. High consumer as well as corporate debt levels has increased a major stress. Due to more focus on individual interests, key financial institutions have failed.

3.Failure of Regulatory and Market Based Control:

Another important factor is failure of regulatory and market based control to measure the risk properly. A downfall in particular markets like housing and stock market has crashed the overall global economy.

4.Non preparation of Key Policy Makers:

Effective policy making is the backbone of success. Key policy makers not prepared for the crisis were unable to understand and oversee the financial system to take effective steps on long term basis.

5.Violation of Accountability:

There is a great amount of violation of accountability and ethics at all levels. People have started giving more value to their individual interests rather than national or global interests. It has created an environment of self fulfillment. No one is bothered about others. Also, it has caused breakdown of overall accountability too which is hindering basic human ethics both on national and global basis.

So, on the whole we can say that there are multiple factors involved in this global economic crisis including US subprime mortgage crises and breakdown in corporate governance with financial firms taking excessive amount of risk. Too much risk by households is another important factor of putting financial system on a collision.

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