Whilst mortgage-backed securities is when banks securitise mortgages by pooling them together and then selling them to investors. Investors then receive monthly interest and principal payments, whilst banks receive a fee for the sale. In this paper, I claim that due to a specific instance of cultural change namely the economic collapse of and its continued effect on the public perception of the energy industry in Canada through.
Economic growth is mostly stagnated and has been since the global financial collapse of This collapse led people into different avenues of providing financially for their families and themselves, mostly due to the loss of jobs. In addition to that, people had surrendered to the idea that their financial futures would be threatened and that there is not secure job as that is a paradigm of the past.
Great Depression Essay
It appeared that the only viable option would be to start a business of their own. In an effort. Research indicates the possibility of an economic collapse because of the exorbitant national debt, loss of jobs, and the falling stock market. History can tell a story that many people overlook. People tend to repeat their mistakes and if we take a look at what is in the past we can predict what the future may hold. The economic crash of was a difficult time for all of the people around us. This situation has impacted our country and what is around even to this day.
It was a tough time for a lot of families and big businesses. This stock market crash was one of the worst the United States had ever had. Even to this day we are still trying to repair it what went down. Like the employment of jobs, the cost of our products, and homes that were taken away from families. The economic crash came from nowhere. What Caused the Economic Collapse of ?
Throughout history there has always been some sort of a class struggle. The rich always seemed to get richer while the poor barely managed to get by. One of the main things that contributed to the ever-expanding gap between the rich and the poor was greed. Whether it was the greed for money or for power, greed was certainly a driving force. More recently, the greed of several, rich and powerful individuals helped to cause one of the largest financial collapses of modern times.
The purpose of this paper is to establish some of the key players in the economic crash of , and to show some common …show more content…. Sadly, this would not be the case. After the collapse of the savings and loan industry, many top executives were arrested and sent to prison for looting their companies, Charles Keating was one of the main criminals that were sent to prison. This tacit government sanction suggests to us then that in effect the whole financial crisis only came to light because of what amounts to a falling out amongst thieves.
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Once inter-bank lending stopped, credit creation froze, and the Ponzi-scheme parallel in the fiat currency mechanism began to breakdown. In other words, major banks worldwide indulged in what amounts to rampant uncollateralized lending—literally creating and distributing unfathomable amounts of money in the form of debt issuance from nothing, secured by nothing. And quite possibly worth nothing. Concurrent with the runaway lending, central banks throughout the world were channeling trade surpluses with the US as well as with each other into US Treasury bonds while simultaneously creating equal amounts of domestic currency to weaken it in order to maintain export competitiveness.
The most controversial of these arrangements has been the de facto vendor financing agreement China has extended to the US: China suppressed the yuan, exports exploded, and it accumulated surpluses; the US let the dollar fall, consumption exploded, and it accumulated debts. Both actions were irresponsible and highly inflationary.
Combined with similar behavior from much of the world, it produced a flood of liquidity that was if not misinterpreted as emerging market prosperity, certainly overstated it. At the time it was noted primarily for contributing to the low interest rate environment enjoyed in the US that enabled the American consumption binge accompanying the housing bubble.
What Caused the Economic Collapse of 2008?
Few realized housing bubbles were pandemic. Too much money could be leveraged too many times and transferred between too many international markets too quickly. These bubbles, as they must be, were largely based on the sound reasoning, analysis and extrapolations of economic data, as was the price action that supported it on charts; however, positive technical chart patterns cannot readily distinguish between breakouts driven by a glut of fiat currency looking for a speculative return and the supply and demand imbalances in this instance attributed to emerging market growth.
Momentum produced the self-reinforcing hype of being right—something the ETR fell victim to itself—and as markets have discovered, it works in both directions. Because there was so much fiat currency made available by these artificial means, the global spending binge was presumed to be prosperity and to reflect the wonders of globalism. Certainly lives were improved initially and stand to be improved further in the future, but too much cheap money invariably leads to a misallocation of resources, and in retrospect over-capacity was certain to result.
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In an attempt to combat this, central banks are monetizing debt and suppressing interest rates in an attempt to get more money into circulation, for in this case what applies to an individual applies as well to entire nations. This glut of fiat currency produced a surfeit of debt, the most volatile of which is concentrated in emerging markets, and represents a potential calamity for global financial markets because the majority of this debt is not denominated in native currencies which may be inflated away or rolled over indefinitely but primarily in euros, Swiss francs, and yen.
The Swiss have devalued their currency and the Japanese are apparently considering it see below , but the EU is exercising what they consider to be fiscal restraint.
The Depression Of The Great Depression
Germany has been particularly vocal in denouncing quantitative easing and the unfettered expansion of the monetary base for they well-remember the Weimar hyperinflation. But the euro is particularly strong in part because of their comparative fiscal restraint, which is undermining export-dependent euro zone economies, like Germany, and putting increasing stress on emerging market debtors.
The rally out of the March low has seen considerable strength in emerging market currencies, but these conflicting central bank actions have seen few actually recover their pre-crisis values, which makes their euro-denominated debts in particular increasingly expensive and difficult to service.
Many developing countries have maintained or raised interest rates to avoid capital flight, which has sparked a rebound of the carry-trade in which low-interest dollars, euros and yen are sold to buy a basket of commodity currencies such as the Australian and New Zealand dollars mixed with high yielding currencies like the Brazilian real, Hungarian florint, Turkish lira, Indonesian rupiah, and South African rand.
A hiccup in the global recovery could inflame currency volatility as these carry-trades are closed, especially if the amount of leverage approaches anything like that employed in the past. As was seen in the latter half of , violent currency swings can render emerging market fiat currencies virtually worthless outside their borders while driving price inflation within, especially for imported goods such as energy and food.
The list of countries that are vulnerable in this regard, whether due to the implementation of capital controls or to being otherwise burdened by what may prove to be unserviceable debts or dubious policies, represents a broad cross-section of what have been perceived as emerging market success stories over the last decade:. This can only worsen as the World Bank expects another 25 million people to lose their jobs in the OECD alone by The spring rebound in Asian exports may be faltering: Chinese exports dropped There is growing speculation Japan may follow the lead of Switzerland and Taiwan and devalue the yen as they did in Ironically, for all of the early condemnation of American recklessness, according to the Bank for International Settlements it turned out Western European Banks had far more exposure and a greater degree of leverage to emerging market debt than either the US or Japan.
In fact, they held almost all of it. As with most of the world, the EU gained an illusion of wealth from unsustainable spending in countries on the periphery that longed for membership; the asset bubbles, credit growth and investment booms that powered the spending collapsed concurrently with the even more significant bubble in the US. The collapse devastated activity in the export-dependent countries, especially Germany, and poor risk mitigation has severely damaged many European banks.
Kitco - Commentaries - Richard Karn
The failed auction of sovereign debt in Latvia on June 3, may foreshadow what is to come throughout Central and Eastern Europe, occurring as it did despite the backstop provided by the International Monetary Fund IMF in the form of anti-crisis funding programs for Latvia, Hungary, Ukraine, Belarus, Georgia and Armenia. A devaluation, which the IMF favors, would put Latvia in violation of the Exchange Rate Mechanism currency peg they must maintain for membership in the EU, but the attempt to maintain the peg has been ripping the Baltic economies asunder because the bulk of their borrowing was not in their own currency but mainly euros and Swiss francs.
It should also be noted that the political instability in the region has already seen governments in Latvia, Hungary, the Czech Republic and Estonia fall during the economic crisis. Because the European central bank has not embraced quantitative easing and Western European banks have written down so little debt, especially compared with their US counterparts, a number of commentators contend the banking crisis has yet to fully hit Europe. Essentially, because European banks employed more leverage, they have less freedom to mark down debt, which makes them vulnerable in these conditions.
The rapid economic deterioration sparked widespread political unrest in Iceland, Greece, Ireland, Italy, Spain, and France. The riots that were widely expected this spring and summer as the implications of the financial crisis were absorbed by the masses have been forestalled by the revival of global markets but serve to highlight a percolating dissatisfaction. The irony that attempting to maintain some semblance of fiscal sanity in a world of fiat madness could potentially undermine the European Union is testament to how far things have gotten out of hand.
Something on the order of three-quarters of net capital movements globally are transacted in US dollars, withno likely substitute on the horizon, so as the only credible alternative to the dollar, should a banking crisis erupt in Europe in the current unstable environment, a collapse of the euro, which was unthinkable a year ago, can no longer be dismissed out of hand. Part of the answer is simply that there is no credible alternative to the dollar, but habit and momentum play a role as well. This spring, once the crisis was perceived to have passed, the money was repatriated, inducing dollar weakness as that money sought a speculative return elsewhere.
The world in fact shut-up and let the dollar, not the euro, yen, yuan, franc, or ruble, do its job, which is to guarantee the resiliency and continuity of the global economy. To an as yet undetermined degree the Fed and Treasury have done exactly that by taking the most extraordinary steps imaginable. US officials did something while their European and Chinese counterparts stood around wringing their hands.
We question the legitimacy as well as the efficacy of those efforts, but the world looked to the US for leadership and the US delivered. A stream of American commentators, with Wall Street analysts leading the parade, are adamant the end of the dollar is neigh—and we have long maintained that this will indeed be the fate of the dollar, just not yet, for with the exception of the EU the rest of the world has been practicing various forms of quantitative easing, i. Imagine that. Little commented on by the US media, but as can be seen on the following chart, the period between early December and the March bottom saw the price of gold and the dollar synchronize as both were sought in the global flight to safety:.
During the worst of the panic, gold led the dollar up, making new highs against the fiat euro, Swiss franc, ruble, rupee, Australian dollar, South African rand, South Korean won, and Mexican peso to name but a few. This signaled a profound change in the monetary landscape. In fact, virtually the only two currencies that gold did not make new highs against were the US dollar and currencies pegged to it by virtue of its reserve currency status and the yen, arguably due to the unwinding of leveraged carry-trade positions and the Japanese penchant for repatriating yen during crises.