Global Financial Crisis - a Preventable Catastrophe

Brief Essay – Major problem, issue or challenge the world faces and which has something to do with development

Topic: Global Financial Crisis, a preventable catastrophe.

The world is connected through a variety of relations, but a substantial connection is the economic relations. Although the United States plays a significant role when compared to others in the worldwide economy but still everyone has a responsibility as a downfall in one economy has the ability to affect surrounding nations.

After the incident of September 11th 2001, the US Federal Reserve chairman Alan Greenspan lowers interest rate to only 1% in attempt to keep the economy strong. Although this is a low rate of return for any investment, it's a perfect opportunity to borrow money from the Federal Reserve. Since the rate is so low, financial institutions begin to borrow significant amounts of credit and offering great deals with the use of leverage. Since there is an abundance of credit, financial institutions begin to take more risk on lending out credit such as subprime mortgages. Institutions no longer cared about what made the economy stronger but instead were in pursuit of wealth. "Some of America's best and brightest were devoting their talents to getting around standards and regulations designed to ensure the efficiency of the economy and the safety of the banking system. Unfortunately, they were far too successful, and we are all - homeowners, workers, investors, taxpayers - paying the price." (Fruit of Dishonesty) Since the United States has a dominant position in the global financial system other financial institutions worldwide were heading for their downfall, creating the global financial crisis.

The global financial crisis was something that was preventable as some have depicted the issues that would lead to the crisis long before it occurred. A documentary about Michael Rupert gives a good idea as how he "predicted the global financial crisis long before Wall Street crumbled. He foresaw the mortgage crisis in the United States" (Collapse). If members of the global financial system (GFS) were to take into consideration of economic predictions and forecast, precautions could have been taken. Instead, the financial institutions chose to ignore any possible problems that would have a negative view on the "good times". Their ignorance comes at a price which can be considered a contribution to the what we know as the global financial crisis, Joseph Stiglitz a university professor at Columbia University states that "the banks reject any suggestion they should face regulation, rebuff any move towards anti-trust measures — yet when trouble strikes, all of a sudden