The paper "The Financial Crisis of 2008 " is a perfect example of a macro & microeconomics case study. The financial crisis of 2008 was one of the toughest financial crises which engulfed all economies around the globe. It is considered as one of the toughest crisis since the great depression of 1930. Some of the prime reasons which were identified to have led towards the crisis are the incapability of multinationals to deal with the situation, decrease in the value of assets, increased government interventions and changes in the economic activity which impacted all world bodies due to globalization (Wadhwani, 2008).
The world bodies have come together and have made the required regulatory changes so that such a situation can be controlled and appropriate steps are taken from the beginning to prevent such incidents. This paper will look towards concentrating on the different reasons which led to the financial crisis in 2008 and linking those with economic policies and strategies so that appropriate steps can be taken to prevent such a situation in the future. The global housing bubble collapse can be considered as one of the prime reason which began the financial crisis of 2008.
It was witnessed that the US housing prices fell down by over 40%. This impacted the securities which were linked to the housing sector as securities were backed by housing prices. Fall in the price of the housing sector reduced the value of securities which thereby impacted the financial market as the prices of securities started to fall quickly (Ryuhei, 2009). Stock markets started to face issues associated with liquidity as a fall in housing prices created a liquidity crunch.
Organizations started to fail as liquidity credit was increasing and economies were facing a liquidity crunch which thereby resulted in a financial crisis and impacted all world bodies due to globalization. Prior to the crisis, the US was witnessing heavy growth rates, especially in the housing sector as the prices were continuously growing. The chart below shows the manner in which the US was witnessing a strong growth due to a rapid rise in housing prices which reduce after the financial crisis. Figure 1: US Financial Growth Rate to the Crisis
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