The Causes of the Financial Crisis and the Overhauling of Regulatory Essay

The Causes of the Financial Crisis and the Overhauling of Regulatory good example - Essay ExampleFirstly, with regards to the banking and economic meltdown that occurred betwixt 2007/2008, this must be understood as a global crisis. Although it began in the United States as a result of the subprime mortgage crisis, it rapidly spread globally and has affected every extant economy in the world slowing growth, diminishing export strength, and devaluing a litany of world currencies in the process. Figure 1.0 denotes the issue of debt to gross domestic product within major world economies. Figure 1.0 Preventative Steps As a function of the dislocation in regulatory mechanisms capable of dealing with the size of the hit of 2007-2008, many of the bombasticst and most effective regulations cast been international in scope. But a few of these global regulations include the Basel III International Framework as well as advance EU regulations concerning Markets in Financial Instruments Di rectives (MiFID). Ultimately, these further regulations, in bicycle-built-for-two with existing regulations on the banking sector seek to integrate a set baseline of rules with regards to the standards underlying bang-up liquidity within the marketplace. Due to the fact that the ultimate issue that the banking system was faced with during the crash was coaxal around liquidity, most of the further regulations that endure been passed with regards to seeking to provide a remedy to any further exhibitions of the same problem have been concentric upon speaking to the underlying weakness of the liquidity requirements that existed prior to the crash of 2007/2008. In seeking to identify the overall effectiveness of the current regulations, it sack be said that they have kept the world from experiencing any further shocks similar to the ones that precipitated the events of 2007/2008 however,... This essay aims to fully discover the means by which the pecuniary and banking crisis occur red and also seeks to establish whether or not the current regulatory framework is in and of itself qualified to provide a firewall against any further shocks to the market. The discussion is also briefly concentric upon the future prognosis that the global economy has to look forward to based upon the realities that have been discussed and presented.The financial crisis of 2007/2008 was predicated by the banks which had leveraged bad debt in order to create more debt for their clients. Ultimately, this can understood as a situation in which current types of outstanding credits that a bank had in the form of loans to various entities or stock market derivatives were falsely identified as suitable contingents upon which further money could be created and/or loaned within the financial system. Any further bailouts or interference on the part of the government within the banking system be deemed ineffective. The ramifications of inaction are strong, the fact of the matter is that a precedent has now been set whereby the banking system can behave in a reckless manner, knowing that as long as their bank is large enough to be considered too large to fail they can always count on creation backed by the government, and ultimately the citizen taxpayers.The greatest threat that continues to exist is with regards to the economic threat of unsustainable debt a stake that has only grown in the years since the economic collapse.