The Global Economic Crisis Essay Example for Free

The Global Economic Crisis Essay The current global financial has spawned a renewed interest among economists and policymakers to identify its causes and to come up with possible solutions. There were a number of financial crises that have taken place in the 20th century, a considerable number of which elicited panic that the whole economy was at the verge of collapse (Karabell). Countries previously affected by economic crises seem to be rebounding, with improvements in credit ratings and returns of foreign capital. Despite the lessons learned from the past crises, it is inevitable for history to repeat itself. Moreover, not even the world’s strongest economy is immune from this terrible fate. The meltdown in the US mortgage industry started the series of unfortunate events that led to the massive economic crisis. The perception that real estate prices would rise encouraged financial institutions to loosen their standards to borrowers (Shiller 29). However, this economic slowdown was not contained in the mortgage industry. Months after the initial signs of such slowdown, bigger financial institutions have been hit of what has become a global financial crisis. It was like dominoes falling one right after another: The demise of Lehman Brothers tipped to the rush sale of Merrill Lynch to Bank of America, followed by the federal takeover of AIG (Duffy). Now that the U. S. government has granted a $7-billion bailout, the U. S. financial market shows promising potentials of recovery. Yet, none can be of infallible certainty as to its sustainability (Sahadi). It is impossible to account at this early point of time the effectiveness of the bailout. What is possible is to recognize what is happening and to take basic steps in the restructuring of the institutional foundations of the financial economy. These include taking short-run remedies to put a halt at least to the continuing detriments of the crisis and to employ long-term changes that would reduce, if not totally eradicate, the risk of another global financial crisis. Works Cited Duffy, Michael. â€Å"After the Financial Crisis, a Cleanup That Changes Everything. † Time Magazine. 22 September 2008. 28 October 2008 http://www. time. com/time/business/article/ 0,8599,1843213,00.html. . Karabell, Zachary. â€Å"In A Few Fateful Days. † Newsweek. 18 October 2008. 28 October 2008 http://www. newsweek. com/id/164593. Sahadi, Jeanne. â€Å"Bailout is law: President Bush signs historic $700 billion plan aimed at stemming credit crisis. † CNNMoney. 4 October 2008. 28 October 2008 http://money. cnn. com/2008/10/03/news/economy/house_friday_bailout/index. htm? postversion=2008100309 Shiller, Robert J. The Subprime Solution: How Todays Global Financial Crisis Happened, and What to Do about It. New Jersey: Princeton University Press, 2008.