The Financial Crisis

The Financial Crisis of 2008

The Financial Crisis of 2008

Introduction

The economic and financial crisis is really becoming an issue of concern dimension, as always, to the most vulnerable. Its trigger was subprime. The course of events has shown that this situation is so serious because of the large amount of toxic derivatives that have no real value to support them, including sub-prime (Soros, 2008, pp.96-100). The contamination has spread throughout the world, in a global market increasingly regulated beyond national borders. The financial system crisis has moved to the real economy, found it difficult to get credit. As a result, what seemed at first that they were liquidity difficulties i.e. it has been shown that it is a solvency problem.

Governments have to consider other ways to grow and consume in an unequal and predatory economic system. Economists argue about the causes that have led to a crisis of this magnitude and the factors that have been identified, but does not have consensus. There had been no accurate predictions about the possibility of the outbreak of the crisis and the nature of it and the length could have. However, many economists have warned of the dangers that loomed as a result of the expansion of the housing market and financial system and speculative bubbles that were created in both markets, in it quite interrelated (Shiller, 2008, pp.173-79).

In the global financial crisis, the impact of the import and export industry on growth is at the cusp of the most direct and serious. First of all, the crisis has shifted from the financial to the economic level, the direct impact on exports. U.S. consumer spending accounts for more than 70% of GDP in 2007, the scale of U.S. domestic consumption of about $10 trillion, while the Chinese consumer spending is about $1 trillion (Png, 2008, pp.46-49). In the short term, increased domestic demand in China cannot make up for the U.S. economy to China reduce import demand. It is estimated that US economic growth in every drop of 1%, Chinese exports to the U.S. will drop 5% to 6%. Second, the subprime crisis to further strengthen the weak position of the dollar accelerated the rate of depreciation of the dollar, which reduces the advantage of export products (Lewis, 2010, p.201).

US Federal Reserve continue to lower interest rates for banks to inject liquidity into a contradiction with the tightening of monetary policy in China, resulting in a lot of hot money flowing into China to accelerate the process of depreciation of the dollar and the appreciation of the renminbi, making Chinese exports reduced price advantage, exports to the U.S. is a challenge (Krugman, 2009, pp.128-9). The role of the above factors, China's exports showed signs of deceleration. China in the first half continues to follow the trend of deceleration of export growth. From the export amount in the first half year-on-year increase of 21.87%, nearly 6 percentage points lower than the growth rate of ...