Current Financial CrisisAbstractIn the underlying report, we have to locate the causes and effects of the current economic crisis. What the reasons are behind that and how it became to be the cause of certain disintegration that affected the economy of the whole world. Introduction In the contemporary era, the world’s economy revolves around the super powers, which create a monopoly, extract surplus to the other countries and accumulate wealth. The economy is not stagnant; it always moves in a circular manner rather than linear. It is not the case that economy only affects particular regions; in fact it has left its effect all over the world and has generated a crisis.
Crisis always emerges due to weak policies made by the metropolitans. The history of economic crisis goes back to the “Great Depression” that started in 1929-1935. It gives us a brief understanding of the economic crisis. America had joined war late; during the war America was the only stabilized economic country and she had financed Europe for its reconstruction. America had invested a lot in the making of Europe.
Due to this financial aid the American economy had declined, due to the accumulation of debt and ultimately the economy boomed. The sole aim of the war recovery was to produce more capital; the American economy was most affected in this era, due to lending the loans. There are various causes behind these crises. It is possible that it was due to the weak institutions, inflation, unemployment and agriculture. So here we will locate some cause and effects of the current economic crisis. The crisis first started in the 1930’s but the remedies for removing that crisis remain since 60 years.
Now some new suggestions are required to overcome this financial crisis. There must be some monetary institutions like IMF. Also, banking system must be stabilized. Causes and Effects of Economic Crisis The collapse of the American co-operative sector in the midst of the global financial crisis and its co-committed efforts on the European economies has set tide global recession. Besides, it has also exposed or brought about some inherent flaws of global capitalism ranging from mindless deregulations to the limitations or fragility of market economy. The first cause may be ascribed to the present crisis in increasing greed.
It has been a tendency of the capitalistic dispensation / system to always allow for this excessive greed in the name of innovation, creativity, individual enterprise and incentive for progress. So, this resulted in a concentration of wealth and development of monopolies and cartels. Unfortunately, this behavior is not confided to individuals; rather it also provides justification for various civilizations like colonialism, imperialism exploitation and other forms of human exploitation. This greed becomes more conspicuous after new liberal consumers, which necessitated minimal role of state and supported doctrine of deregulation.
In the context of the present crisis, this led to the phenomena of credit expansion through banks without under substantive state control, which invariably led to the accumulation of huge amount of risk capital. Thus this very phenomenon led to the bubble economy.