Macro and Micro Causes of Financial Crisis Essay - 2230 Words

Corporate and Wholesale Finance - 12BSP053 â€Å"Since 2007 to mid 2009, global financial markets and systems have been in the grip of the worst financial crisis since the depression era of the late 1920s. Major Banks in the U.S., the U.K. and Europe have collapsed and been bailed out by state aid†. (Valdez and Molyneux, 2010) Identify the main macroeconomic and microeconomic causes that resulted in the above-mentioned crisis and make an assessment of the success or otherwise of the actions taken by the U.K government to resolve the problem. By Alistair Walters – A913910 1 Five years on from the beginning of the worst financial crisis he world has seen we are still in a perils state of low or negative growth and low interest†¦show more content†¦These low rates 120% 100% 80% 60% 40% 20% 0% 1987 effectively encouraged frivolous spending and heavy borrowing allowing people to live beyond their means. Low interest rates also increased the discount value of assets and therefore increased their value. This created a house price boom in the UK and US. It was in the US that this twined with high levels of borrowing created the subprime lending market, whereby individuals with poor or no credit history borrowed vast subs of money to buy 2001 1991 1993 1995 1997 1999 2003 1989 2005 2007 3 US UK EU The Causes of, and Response to, The Financial Crisis property. Lenders underwrote the loan against the value of the house with little concern for the ability to repay due to the booming property market and sold the debt as packaged securities on international capital markets spreading the debt overseas. Once the houseShow MoreRelatedIntroduction: The financial sector has been hit badly by the financial crisis in 2008. The1600 Words   |  7 PagesIntroduction: The financial sector has been hit badly by the financial crisis in 2008. The increased competition between banks induced executives to take excessive risk to maximize bank’s profit, as their performance compared to other competitors is measured by the revenues they achieve to financial institutions and its stock value (Kashyap, Rajan et al. 2008). Banks went into trouble especially after the expansion of mortgage finance and facilitating loans to homebuyers with the lowest possibleRead MoreCauses And Policies Of Financial Crises1701 Words   |  7 PagesCauses and Policies in Financial Crises Financial Crises are well-known phenomena in economics history; however, after the Great Financial Crisis of 2007-2009 the role that Central Banks play in order to prevent Financial Crises has been questioned. To begin with, it is important to understand that crises consist of highly complex macro-financial linkages that reflect the interactions between the financial sector and the real economy (Claessens 2012). Additionally, it is important to highlight twoRead MoreAir Asia1116 Words   |  5 Pageschallenges. These challenges can be from the internal and external resources. This can be very well explained with the Micro and the Macro environment factors: MICRO ENVIRONMENT Micro environment define as â€Å"The factors which are close to the company that affect its ability to serve its customers -the company, suppliers, marketing intermediaries, customer markets, competitors and public†. Micro environment in Air Asia can be define by using PORTERS 5 Industry forces: * Threat of New Entrants New entrantsRead MoreAir Asia1129 Words   |  5 Pages These challenges can be from the internal and external resources. This can be very well explained with the Micro and the Macro environment factors: MICRO ENVIRONMENT Micro environment define as â€Å"The factors which are close to the company that affect its ability to serve its customers -the company, suppliers, marketing intermediaries, customer markets, competitors and public†. Micro environment in Air Asia can be define by using PORTERS 5 Industry forces: * Threat of New Entrants New entrantsRead MoreEconomics : Economics And Micro Economics1238 Words   |  5 Pagesaround that. There are two types of economics, there is macro-economics and micro-economics. Macro-economics studies the economy as a whole, while micro-economics studies the smaller aspects of the economy. In the automotive world, the macro-economics part would evaluate how automobiles are selling, and micro-economics would evaluate how each vehicle is selling. Macro would see how a jump in gasoline prices would effect the economy, but micro would see how it would effect the consumers in generalRead MoreECON 350 Review Essay ----Athanasios Orphanides article Is Monetary Policy1400 Words   |  6 PagesECON 350 Review Essay ----Athanasios Orphanides article Is Monetary Policy Overburdened ? Summary Introduction: After the global financial crisis, the economies of many countries were stagnant, some companies closed down, many people lost their jobs, and governments needed to spend much money to help these companies and unemployed people which caused large government debts, the banks also faced to bankrupt. All of these problems caused the governments wish the monetaryRead MoreThe Main Costs And Benefits Of The Financial Sector Of Uk1976 Words   |  8 Pages1: Introduction The financial sector, which is seen as the brain of the economy, plays a pivotal role in providing and channeling finance for consumption and investment in UK economic system (Whittaker, 2002). It encompasses a broad range of financial institutions including banks, building societies, insurance companies and pension funds. Banks, which account for 57% of gross value added of the UK financial sector in 2011, are the key players in the UK financial system (Burgess, 2011). In fact, aRead MoreLenovo1745 Words   |  7 Pages SUMMERY-----------------------------------------------------------3 BRIEF INTRODUCTION----------------------------------------3 FINDINGS-----------------------------------------------------------3 1.The macro-marketing environment---------------------------------3 2. The micro-marketing environment--------------------------------4 3. Lenovos SWOT analysis----------------------------------------5 4. STP analysis-----------------------------------------------------5 CINCLURead MoreAirasia1488 Words   |  6 PagesYAN SCM 015157 DIPLOMA IN GRAPHIC DESIGN DATE: 10 OCTOBER 2012 LECTURER: MS. MAZLIZA ISMAIL Table of Contents Introduction 3 Questions for Discussion 1. What are the micro and macro environmental factors that have contributed to the early success of AirAsia? 4 2. Discuss the micro and macro factors that would affect AirAsia’s performance in the current competitive environment described in the case? 7 3. By focusing on low prices, has Airasia pursued the best strategyRead MoreLenovo1745 Words   |  7 PagesSUMMERY-----------------------------------------------------------3 BRIEF INTRODUCTION----------------------------------------3 FINDINGS-----------------------------------------------------------3 1.The macro-marketing environment---------------------------------3 2. The micro-marketing environment--------------------------------4 3. Lenovo s SWOT analysis----------------------------------------5 4. STP analysis-----------------------------------------------------5