Global Financial Crisis of the United States Mortgage Industry

Global Financial Crisis of the United States Mortgage Industry In 2008, the world suffered global financial crisis that led to world’s economic retardation, it was believed to have originated from the United States mortgage industry. The crisis led to economic down falls of companies, governments, countries, and institutions; during the period, majority of nations recorded a negative economic growth rate.Advertising We will write a custom essay sample on Global Financial Crisis of the United States Mortgage Industry specifically for you for only $16.05 $11/page Learn More Although the exact cause of the crisis is complex and intertwined, it is believed that, two major American mortgage companies called Freddie Mac and Fannie Mac were responsible for the crisis; by the end of 2007 the two corporations had owned and guaranteed over 50% of the United States mortgage market. The amount of loans they owned was beyond their control leading to increased costs as the market and price of houses went down (Shaw, 1996). The main sector that was affected by the crisis was the financial and insurance sectors as they were directly involved in the financing and insuring for the homes. With the crisis, the firms were getting loss of revenue as people were not able to finance their facilities and at the same time insurances were finding it hard to compensate all the claims that were made by either the financier or the customer. The deterioration of economies called for government to take fast and immediate measures to rescue their nations; the United Nations for instance had to make policies that protected its local industry from the adverse effects of the crisis. The country made indirect and direct methods to protect their local industry from competitions of outside world (Park, cona Fingess, 2008). Monetary and fiscal policies were adopted to manage the economy and ensure that positive economic development has been attained. The challenge that the government had to contend with was how to have expansion ary policies in the economy and yet they wanted to protect their local companies. One of the major impacts of the crisis is deterioration in the living standard, this is because many jobs were lost as trade among countries was affected negatively, and companies were forced to lay off workers. Families’ living standard deterioration brought psychological suffering.Advertising Looking for essay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More As governments tried to finance its budget deficit, the main area that suffered was the developmental budget. Infrastructures were delayed and their budget sliced because of lack of funds. This led to a slowed development and increased poverty. Insurance and banking companies were largely affected and many are them that seek for bailing out by the government. In modern globalizing environments, there is much emphasis on international trade; however the effects of glo bal financial crisis were adverse and affected the normal operation of international trade. Companies, both local and international were challenged with reducing demand for their products as disposable income among their target markets were reduced. Some policies that were enacted by the government of the United States will have along lasting impact on the economy; for example as a measure to attract foreign direct investment, the country relaxed FDI legislation rules making the local industry vulnerable to international competitions (Ambachtshee, Beartty Booth, 2008). Other than on infrastructure and living standards deterioration, global financial crisis affected the poverty levels of different nations especially the developing countries. Countries like Zimbabwe in Africa had their currency level depreciate to the level of intervention of International Monetary Fund’s and the World Bank; with the currency deterioration, the poverty rate of the country has continued to incr ease. References Ambachtshee, K., Beartty, D. Booth, L. (2008). The financial crisis and rescue. What went wrong? Why? What lesson can be learnt? Toronto: university of Toronto Park ,R. cona, K. Fingess, M. (2008). The crisis of global environment governance: towards a new political economy of sustainability. New York: Wiley. Shaw, M. (1996). Civil society and media in global crisis: representing distant violence. Michigan: Michigan publishersAdvertising We will write a custom essay sample on Global Financial Crisis of the United States Mortgage Industry specifically for you for only $16.05 $11/page Learn More