The Great Recession 2008 Term Paper Example | Topics and Well Written Essays - 3000 words

The Great Recession 2008 - Term Paper ExampleAccording to the research findings the 2007 worldwide financial crisis has had serious impacts on the economies of many countries, resulting to what economists chatter the Great Recession. The downturn began signly as an isolated problem with the sub-prime sector in the US housing market, mutating to a serious and fatal recession by the beginning of 2008. Consequently, other nations especially in the European Union followed the US into the crisis by mid-2008. In essence, 2009 was the first recorded year in history that the global economy was actually in recession since the Second World War. Interestingly, the recession came as a surprise to many economists, investor, academics, policy-makers, and multilateral agencies. For instance, Organization for Economic Co-operation readings Jean-Philippe Cotis was quoted as speculating further growth in the global economy because of the buoyancy of emerging economies and favoring financial condi tions. After the economy drove into recession, the economics barter was under fire for failure to predict the financial downturn. As a result, there were few intellectual conversations taking place between scholars of like minds. Therefore, the underreckoning of the severity of the global downturn was not surprising. Indeed, some leading financial forecasters like World Bank and International Monetary Funds revised their initial to their growth forecasts in 2008 and 2009. Nonetheless, there were warnings from a few economists of a brewing economical disaster. A portion of the economist predicted a looming recession based on economic models where the accumulation of the private sector was the central cause. However, their cries were not significant enough for the majority of the lulled individuals. Despite all these, the warning signs were blinking red cozy monetary policy especially in the US, lax in financial regulation, misperception of risk and search for yield, and huge curre nt deficits in UK, US, and other super economies that accumulated huge savings of oil exporters and emerging economies. Events of 2008, with emphasis on the collapse and consequent closure of Lehman Brother, reversed the perceptions of risk-taking banks (Clungston, 2008). However, the complexity and nature mortgage-backed securities left close to banks in the dark concerning the exact level of liabilities that was linked to the severing housing sector in the US. Thus, liquidity of most banks dried up, literary bringing the global financial system to a halt. Some critiques were quick to question the survival of the American-style capitalism. Governments in developing and advanced countries were quick to react aggressively, injecting obscene credit amounts into their financial markets, reduce interest rates, nationalizing banks, and unveiling stimulus packages to increase discretionary spending. Most policymakers were determined to avoid mistakes from previous crises, and their res ponse was important avoiding disastrous depression in most countries,