Example Of Essay On The Financial Crisis And The Future

Financial crises are not a qualitatively new phenomenon for the world economy. At the time, some researchers have already drawn attention to the fact that since 1973, compared with the period of the Bretton-Woods system and the gold standard, the frequency of crises has almost doubled, and the intensity of modern crises corresponds to the fact of what was a crisis of 1920 and 1930 years. Thus, the history shows that in our time there has been occurred something very peculiar and disturbing (Fried, J., 2012).
Modern financial crisis began in the US real estate market in 2007 and quickly enough gripped financial markets in this country, and the financial sector of other developed countries, primarily the EU and Japan. Thus, in contrast to other post-war crises, the modern financial crisis has began in the markets of developed countries, i.e. countries that have traditionally been considered as a locomotive of the world economy, and their economic resistance in the long run did not cause any serious doubt. Even before the crisis, many international organizations and national regulators drew attention to a number of alarming trends in the global economy, but the connection between the discussed problems and their combined crisis potential were clearly underestimated. During the analysis of the causes and mechanisms of the crisis quite naturally raises the question of whether there was awareness of the dangers of the crisis, and if so, why the warnings were not heard in a timely manner. (Koller, C., 2012) Factually, many of the problems that led to the crisis, have been identified for a long time. Among the evidence for this are the numerous reports of the IMF, the Bank for International Settlements (BIS) and the Financial Stability Forum. All these institutions are quite clearly talking about the growing risks in 2004: the presence of global imbalances; exposure to volatility of liberalized financial systems; bending behavior of market agents under the influence of low interest rates; danger "open inflation" or consequences of growing public debt; the need for national and international frameworks macro-stabilization; The risk of abrupt changes in the credit cycle; vulnerability properly tested non-structured financial products; weakness of credit ratings in assessing the risks of the whole complex; exposure to investors in securities backed by mortgages, the risk of unexpected losses; increase in the medium-term risks and so on. The reports of 2003-2006 mentioned the need to improve risk management practices and disclosure of complex examination of investment projects, approaches to supervision, conflict of interest in the rating companies. In September 2006, the organizations have named the risks associated with household debt, high real estate prices, the rapid growth of the acquisition of assets with borrowed funds, the increasing complexity of financial instruments and global imbalances. It was also demanded that market participants should took into account all the possible consequences of a potential change in the current favorable conditions, including less liquid markets (Wallison, P., 2013).
However, some governments do not act together and prepared a single confrontation looming problem. This led to the global financial crisis of 2007-2008. Conclusion from the above is the following: there was enough information and understanding of the situation in order to prevent the global crisis, however, there were not made significant steps to address the problem. That is why it is important next time to deepen the cooperation between the independent states to confront new global shocks together.

Works Cited

Fried, Joseph. Who Really Drove the Economy into the Ditch? New York: Algora Pub., 2012. Print.
Koller, Cynthia. White Collar Crime in Housing Mortgage Fraud in the United States. El Paso: LFB Scholarly Pub., 2012. Print.
Wallison, Peter J. Bad History, Worse Policy: How a False Narrative about the Financial Crisis Led to the Dodd-Frank Act. Washington, D.C.: American Enterprise Institute for Public Policy Research, 2013. Print.