Financial Crisis And Its Effects On The World Economy

Abstract Between the years of 2007 to 2008, the world was faced with a major financial meltdown with global market failures and economies in shambles. The emergence of subprime mortgages and the collapse of securitized derivatives led to much speculation of different causes. What was the root factor that led to the triggering of this financial crisis? This research conducts a comparative analysis of my research and beliefs on the cause of the crisis contrary to other researchers’ conclusions. It is an aim to provide my hypothesis on the leading factors and conduct an analysis from experts to test my hypothesis. Experts’ results were examined to reach the solution that factor such as securitization; easy money and other issues was the main known causes of the crisis. Although there is no specific root cause, I came to the conclusion that due to historical evidence, easy money was the cause of most financial crises. The financial crisis of 2007-08 also commonly referred to as the global financial crisis caused a rippling effect on the world economy, leading to the dissolution of some of the largest corporations. There are many factors that led to the crisis such as deregulation, gained popularity, easy access to subprime mortgage loans, low interest rates, securitization and the bursting of a housing bubble and illiquidity. The combination of a real estate burst and their underlying mortgages that were securitized is the most rampant speculation of the cause ofShow MoreRelatedExploring the Contagion and Its Effect on Macroeconomic Conditions1452 Words   |  6 Pagessubprime mortgages, began to struggle. The result was a credit crisis, followed by substantial government intervention in the industry. This crisis then spread throughout much of the rest of the world. The contagion effect was driven by factors such as financial institution connectedness and exposure to the US economy. 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