The Global Economy

During the past few years, the global financial crisis and the public debt crisis have been main phenomenon of the global economic meltdown. Since the mid of 2007, in the US, the subprime mortgage crisis has exploded and then its impacts have spread to the EU, Asia, even the rest of the whole world gradually which has been accepted as the trigger of the global financial crisis. This essay will discuss the main causes of this economic crisis especially in the US and the EU and analyze some methods or policies which could have been done to avoid it. Finally, I will concentrate on the future situation which the European Monetary Union could be in.

The year 2008 is considered as the nightmare of the global economic because of the explosion of the sub-prime mortgage crisis in the US since the mid of 2007. Some scholars (Lo.Re 2011, Iqbal 2010) opine that this crisis is the main contributor of the global financial crisis because of the US economic status. If we review this crisis, housing and credit bubbles can be seen as the main cause, proved by Moyer (2012). Real estate developers, bonding companies, banks and house purchasers were in a vicious circle to make the real estate market abnormal with the high housing price and interest rate of loans. Eventually, from the statement of Iqbal (2010, p.36) ‘sub-prime problem soon dispersed and…that soon bankrupted a host of mortgage finance firms, banks, investment banks and insurance firms’, we can know that housing and credit bubbles have burst which led the bankruptcy of some banks and any relevant companies because of the default of loans from developers and purchasers. Most economists like KOWALSKI (2011) consider that the new liberalism of non-intervention market policy implemented by the US government and the lack of financial supervisory market have been root causes of this crisis.