The paper "A Critical Perspective of the 2007-8 Financial Crisis" is a perfect example of a macro & microeconomics case study. The 2007-2008 Global Economic down Turn was a unique economic challenge that has ever engulfed the world since the great World Great Depression of 1929-1934. It started in the United States of America and spread to other parts of the world (Petrovic, 2010). The origin of this recession can be traced to; easy credit conditions from financial institutions that encouraged high-risk lending and borrowing, international trade imbalances, real estate bubble, government fiscal policies in terms of revenue and expenditure.
Because of its far-reaching repercussions like the threat of collapse of large financial institutions, the bailout of banks by national governments, downturns in stock markets, skyrocketing of commodity prices and the persistent decrease in value of many economies’ local currencies against major currencies and in many areas, the housing industry got almost crippled. This made economists and financial analysts try and diagnose the root cause of it and possibly make a suggestion on what ought to be done to avert or deter the resurgence of another economic crisis of such magnitude. One of the Economists who have written about this is the former Nobel Prize, William Joseph Stiglitz.
In His book ‘ The Free Fall’ he clearly writes about how negligence and greed by the banking industry players in the US-led to a worse economic crisis in the World than even the World Great Depression of 1929 to 1934 which also hit the world over. In an excerpt from his book ‘ Free Fall’ (2010), he clearly indicts organization strategies as a ruthless, profit-motivated instrument and of management being complicit agents of capitalism at least within the financial cycles whose only motivation is abnormal profits regardless of the means employed. He also argues that in order to enhance effectiveness in the business industry and the general performance of the whole economy, the market should be self-regulating through the market forces of demand and supply and the way of managing risks should be done in a sober manner and efficient organizations will survive while the less competent will be outdone from the industry by the most efficient firms and that customer will always be the final arbiter.
Abiad, A. and Mody, A (2012), “International Finance and Income Convergence: America is
Different”, IMF Working Paper No. 07/64.
Dvosky, T. Scheiber, H. (2009). “CESEE Households amid the Financial Crisis: Euro Survey
Shows Darkened Economic Sentiment and Changes in Savings Behavior”, Focus on
American Economic Integration Q4/2009, Oesterreichische Nationalbank, pp. 71-78.
Joseph E. Stiglitz.(2010). Freefall: America, Free Markets, and the Sinking of the World
Economy. Norton & Company, In.
Lane, R. (2008). The Macroeconomics of Financial Integration: A European Perspective, IIIS
Discussion Paper No. 265.
Scadler, S. (2010). Do Economists’ and Financial Markets’ Perspectives on the
New Members of the EU differ?, IMF Working Paper No. 07/65, March.
Martin, R., and Winkler, A (2011). Real Convergence in America and Central, Eastern and
South-Eastern Europe, Palgrave.
Mohan,M. (2012). Liberalisation and Regulation of Capital Flows: Lessons for Emerging
Economies, Standford Centre for International Development No. 399.
Petrovic, A. (2010). National Rescue Measures in Response to the Current Financial Crisis,
Legal Working Paper Series No. 8, July, European Central Bank.
Rodrcik, D. (2009). “The Social Cost of Foreign Exchange Reserves”, International Economic
Journal, Vol. 20 (3), September, pp. 253-266.
Siedschlag, T. (2012). Managing Capital Flows: Experiences from Central and Eastern Europe,
ESRI Working Paper 234, March.
Zumert, T. (2011). “Credit Developments in CEE: From Boom to Bust or Back to Balance?”,
Slovenian Journal for Money and Banking, Vol. 58 (11), November, pp. 94-101.