Analyzing the global economic crisis, its magnitude and effect has recognized it as the top second financial crisis that is devastating worldwide. This predicament affected all economic sectors across the globe leading to down fall of some segments. The worse division that was affected by this crisis was the housing sector.
Majority of economists believe that the major cause of this crisis in America is the housing division. Various factors contributed to financial crisis besides the housing sector. According to US company’s assessment, it was wrong for them to reveal that the risk that was linked to the mortgage division was safe. As a result, it contributed to unwise investment decisions by the willing investors. In addition, the low rates in interest were also charged in US during that period. Clearly people are bound to take loans in high numbers when the interest rates are low to make more profits (Nanto 10).
This was an easy decision to make because investors were sure of long term returns in relation to the yield curve that could make them invest in housing segment. The absence of regulating finances in majority states contributed to financial crisis. In this regard, it was essential for financial institutions to pay attention to prevent this impact that affected the housing sector. It is evident that lack of proper guidelines in financial sector increased debts in the market when they failed to check the markets. Additionally, finance departments lead to the situation when they failed to regulate remunerations and monitor loans.
In conclusion, the financial sector is to be blamed for the crisis in finances. As a result, it affected the housing sector contributing to risky investments that appeared to be profitable. Majority of sectors in the economy failed because the banks could no longer offer loans to investors. The government should support banks to reduce financial crisis and restore balance in the economy.
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Bardhan, A. D., Edelstein, R. H., & Kroll, C. A. (2012). Global housing markets: Crises, policies, and institutions. Hoboken, NJ: Wiley
Nanto, Dick K. The Global Financial Crisis: Analysis and Policy Implications. Darby, Pa: Diane Publishing, 2009. Print.
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