FINANCIAL CRISIS 2008

The reasons for 2008 financial crisis and how did it affect the aviation industry

The reasons for 2008 financial crisis and how did it affect the aviation industry

Introduction

Financial crisis can be defined as a condition when money requirement rapidly increases as compared to the money supply. A few decades before, a financial crisis was equal to a banking crisis, but today it can also take the shape of a currency crisis. A lot of economists have come up with concepts and theories on how the financial crisis actually develops and how can it be possibly prevented. There is no consent and financial crises are still a cyclical phenomenon. A stock market crash may also be taken as an example of financial crisis (Soros, 2008).

Currently the world is facing a global recession that is causing businesses to close down, unemployment to rise constantly, and government revenues to shrink. Recent happenings suggest that big developed economies may have touched the bottom and have started to recover but still unemployment level is hiking. Various banks and household consumers are having serious difficulty in maintaining their bank balances, and since people are unemployed they are forced to leave the houses they have acquired through sub-prime loans. Many countries and nations have announced financial support packages for their countries organizations. Many countries have also taken support from International Monetary Fund and World Bank. This financial crisis has exposed various loopholes in the financial systems globally. It has shown that how different economies are related and dependent on each other (Peters, 2010).

The crisis affected countries typically deals with crisis in four phases, first is to hold the crisis and reinstate the confidence in the financial system. The second is managing with the minor effects of the crisis i.e. flight of capital to emerging markets or markets where the effects of global recession are minimum. The third step is making alterations in the financial system so that the risk of any crisis in the future can be reduced. The fourth and last step of the process is dealing with political, societal, and security effects of the financial disorder (Mills, 2009).

Current Scenario in United Kingdom

During the past three decades consumer expenditure has always been the significant driver of UK economic growth and development, but this boom finally came to an end in the beginning of 2008 when first the hike in oil prices and then the inception of the credit crunch activated a sharp consumer cutback. The peak-to-trough slide in customer expenditures was considerably larger than those witnessed in either of the two preceding UK financial turmoil, and the successive recovery has also been much slower. Prospects for the next years to come are relatively depressing, with household consumers under high pressure. It is probable to be 2013 before customers can start to witness the economic healing. Even though, it is expected that the economy will recover, but the rate of growth that is likely to be achieved will be considerably ...