Essays on Global Financial Crisis: Implications on USA Report

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The paper "Global Financial Crisis: Implications on the USA" is a wonderful example of report on macro and microeconomics. The world economy experienced its lowest season and period in the 2008 period upon the hitting of the global financial crisis (GFC). In this case, the GFC had numerous implications on the global government's operations as well as on the performance of multinational organizations that either run bankrupt, due too high loans and declining share and profit margins or were salvaged by government efforts through increased funding advancement (Grosh, Bussolo and Freije, 2014, p. 180).

This was the characteristic of the American Federal government that salvaged many of the banking industry organizations through loans and accredits advancements to insulate the industry and market at large form further collapse and negative implications. Nevertheless, the implications of the GFC despite the efforts initiated by the USA government and individual industries regulations, including low-interest rates as compared to the pre-2008 period. As such, this evaluation develops a critical evaluation of the reasons as to why interest rates have remained low since the GFC and the main reasons holding the interest rates low.

Moreover, the essay evaluation offers a review of expected interest changes into the future, arguing on whether the rates will rise or remain low into the foreseeable future. 2.0 Global Financial Crisis-Implications on the USA The essay topic and issue of discussion will focus on the implications of the global financial crisis on the use of market interest rates both in the past, present, and into the foreseeable future. The essay thus evaluates on the causes for the low-interest rates as well as offering a justification for expectations of future interest rates rise. 3.0 Low-Interest Rates 3.1 Federal Regulations One of the fundamental reasons why the interest rates have remained substantially low in the USA is due to federal government regulations.

On its part, the federal government, through the reserve bank, is legally mandated and entitled to the role of ensuring a steady and stable economy. As such, the establishment of this status is based on the control and regulations on key economic aspects such as interest rates through regulation of money supply and demand in the market.

The USA government initiated a series of policies that have led to the experienced low-interest rates in the market. On one hand, upon the end of the GFC, the government, through the reserve bank regulated short term interest rates to almost a zero value in a measure to control and insulate the market form further inflation in the market. This was achieved through a program in which the Federal Reserve target rate for the commercial banks was reduced to almost zero, a value in which it has stayed since 2008. As such, through the establishment of an interest rates policy, the reserve bank managed to reduce the market interest rates in the short run as illustrated below, On the other hand, Pride, Hughes, and Kapoor (2012, p. 541) stated that in the long run period, the reserve bank developed strategies and approaches to mitigate high-interest rates.

In this regard, the bank purchased back the entire issued government bond and treasuries form the economy. In this regard, the approach had double market interest rates implications. On one hand, it insulated the bond and treasury bills in the market form accruing additional interests in the long run.

This was run in long-term projects initiated by the Federal Bank named the Federal Bank Quantitative easing between 2008, 2010 and 2012 famously referred to as Q1, Q2, and Q3 respectively. The purchasing relatively increased the market money supply base, allowing for increased supply reducing the need for consumers in the market to seek bank loans and credits (Rochon, 2011, p. 23). In this regard, the target for purchasing back the assets from the market was at its highest in 2013 at 3.

03% prior to declining to 2.27% in late October 2014. Consequently, this has a direct impact on reducing the overall interest rates in the USA market over the last six years since the GFC.

References

Campbell, D., November 14, 2013, Banks Want Higher Interest Rates [Online] Available at < http://www.businessweek.com/articles/2013-11-14/2014-outlook-banks-want-higher-interest-rates> [Accessed December 9, 2014].

Coy, P., 2014, Will 5.9 Percent Unemployment Give the Hawks Reason to Raise Interest Rates? [Online] Available at < http://www.businessweek.com/articles/2014-10-03/will-5-dot-9-percent-unemployment-give-the-hawks-reason-to-raise-interest-rates> [Accessed December 9, 2014].

Dowling, J. M., & Rana, P. B., 2010, Asia and the Global Economic Crisis: Challenges in a Financially Integrated World, Palgrave Macmillan, Basingstoke.

Grosh, M. E., Bussolo, M., & Freije, S., 2014, Understanding the poverty impact of the global financial crisis in Latin America and the Caribbean, World Bank, Washington DC.

Jones, C, December 7 2014, Bank for International Settlements sounds alarm over dollar, [Online] Available at < http://www.ft.com/intl/cms/s/0/d1702e12-7df6-11e4-b7c3-00144feabdc0.html> [Accessed December 9, 2014].

Pride, W. M., Hughes, R. J., & Kapoor, J. R., 2012, Business, South-Western Cengage Learning, Mason, OH.

Rochon, L.-P., 2011, Monetary policy and central banking, Elgar, Cheltenham

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