The Financial Crisis that also called Financial storm, points that most Financial index of a country or a few regions sharply deteriorate in the short run.
The housing market declined
The housing slump set off a chain reaction in our economy. Individuals and investors could no longer flip their homes for a quick profit, adjustable rates mortgages adjusted skyward and mortgages no longer became affordable for many homeowners, and thousands of mortgages defaulted, leaving investors and financial institutions holding the bag.
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• Sharp increase of unemployment rate • Even resulting In Social Unrest
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Байду номын сангаас
Because of Subprime mortgage crisis ,in the next two years, developed country will make currency withdrawal for the stability of financial institutions. So there will be a new type of financial crisis. In this time, the biggest victims will be some emerging market countries that will also bring new opportunities and challenges to China's economy.
The credit well dried up
These massive losses caused many banks to tighten their lending requirements, but it was already too late for many of them… the damage had already been done. Several banks and financial institutions merged with other institutions or were simply bought out. Others were lucky enough to receive a government bailout and are still functioning. The worst of the lot or the unlucky ones crashed.
The effects of financial crisis
• 1. Overall decline in economic indicators. In the major developed countries, Leading Economic Indicators, Consumer Confidence index and Entrepreneur Expectation indicaton significantly lowered, meaning the future economy would experience a suffering decline . According to the statistics of the OECD, until October 2008, the LEI of the US, the euro zone and Japan had been lower than the previous for 15, 15 and 6 months, respectively.
This caused massive losses in mortgage backed securities and many banks and investment firms began bleeding money.
This also caused a glut of homes on the market which depressed housing prices and slowed the growth of new home building, putting thousands of home builders and laborers out of business. Depressed housing prices caused further complications as it made many homes worth much less than the mortgage value and some owners chose to simply walk away instead of pay their mortgage.
The causes Market instability The recent market instability was caused by many factors, chief among them a dramatic change in the ability to create new lines of credit, which dried up the flow of money and slowed new economic growth and the buying and selling of assets.
There were other factors as well, including the cheap credit which made it too easy for people to buy houses or make other investments based on pure speculation. Cheap credit created more money in the system and people wanted to spend that money. Unfortunately, people wanted to buy the same thing, which increased demand and caused inflation.
3. Significant downturn in global trade growth. The less demand coupled with the rise of trade protectionism led to the slowdown of the global trade growth. In 2009, the world trade increased by 2.1%. 2.5% less than that of 2008. (Xiang yang Li.2009
monetary crisis debt crisis bank crisis
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• Currency devaluation by a wide margin • The greatly decline of total economic output and economic volume • Economic depression with mass enterprise bankruptcy
2.Significant slowdown in economic growth. Based on the data analysis of 2009, the growth rate of world economy was 2.2%, 1.5% less than that of the previous year, among which the developed countries declined by 1.7% and the developing countries declined b y 1.5%.
4. World economy in face of great risks. The shortterm inflation risk decreased, Except for the financial crisis, the world on the contrary, in some major countrie economy confronted many relative unc s, the deflation might appear. The finan ertainties. International capital flows an cial crisis forced the world economy to d the changing direction of exchange ra adjust its unbalanced situation. In those te could not be clearly identified. The sh developed countries, at the stage of re ortage of liquidity is an inevitable result; cession, the increasing of unemployme that is what Keynes called the liquidity nt would definitely promote the protecti trap. The price of oil would come down onism a bit but still remain on a relatively high level.