Global Economic Crises

Introduction:

The Global financial market of the world is once again undergoing an economic crisis, These crises are worse than those that the world had seen in the great depression of 1930.For the younger generation the current crises might not be too crucial because they didn’t experience the best one but in reality the great depression of 1930 is nothing in front of the current crisis. Such crisis usually effects the economy in the long run because if we put a glance over the past decades we will analyze that most of the financial crisis causes a deficit of capital, which in turn affect the confidence of enterpenure and causes a lack of investment in the economy. Thus the fall in investment suffers the economy in the long run.

The current crisis is termed as a subprime mortgage crisis by the economists because the ground cause of these crises was that the united states market was selling the sub-prime mortgage to those consumers who have an inadequate income sources. These mortgages were collectively bundled into investments in the form of securities and sold by the wall street to number of major financial institutions across the globe. When these mortgages become non-performing then these securitized assets became toxic to the market and infected the whole financial system of the world in a number of ways which is termed as the Global Economic crisis. (Larry Allen, April 2103)

The repeated global economic and financial crisis has destroyed the trust of consumers and investors on banks and borrowers in a number of different major economies of the world. Depositors from all over the world are withdrawing their money from uninsured and even insured bank accounts because they are feeling insecure now and prefer to keep their money with them which causes a deficit of the capital in the money market, that causes a rise in the LIBOR. The reduction in the capital causes a fall in the economy which in turn increases the inflation and unemployment in the market. (David McNally, 2010)

Some of the analysts comment that the major