Financial Crisis Is a Man Made Catastrophe

What is financial Crisis? The term financial crisis is applied broadly to a salmagundi of situations in which some financial institutions or assets suddenly lose a large part of their value. In the 19th and early 20th centuries, more financial crises were associated with banking panics, and many recessions coincided with these panics. Other situations that are often called financial crises complicate stock market crashes and the bursting of other financial bubbles, currency crises, and sovereign defaults.Financial crises directly result in a loss of paper riches they do not directly result in changes in the square frugality unless a recession or depression fol funkys. TYPES Is financial crisis truly a man-made disaster? Lets take display case of Late 2000s financial crisis too known as planetary Financial Crisis. The financial crisis was triggered by a complex interplay of valuation and runniness problems in the linked States banking transcription in 2008. The bursting of the U. S. housing bubble, which peaked in 2007, caused the values of securities tied to U. S. real estate pricing to plummet, damaging financial institutions globally.Questions regarding bank solvency, declines in credit availability and damaged investor confidence had an adjoin on global stock markets, where securities suffered large losses during 2008 and early 2009. some causes for the financial crisis have been suggested, with varying weight assigned by experts. The United States Senate issued the LevinCoburn Report, which found that the crisis was not a natural disaster, but the result of mellowed risk, complex financial products undisclosed conflicts of interest and the failure of regulators, the credit order agencies, and the market itself to rein in the excesses of Wall Street. Causes of Financial Crisis Macroeconomic conditions minor interest rates made bank lending more profitable, plot of land trade deficits resulted in large capital inflows to the U. S. Both ma de coin for borrowing plentiful and relatively inexpensive. The U. S. housing bubble The falling prices of houses and low interest rates to finance or refinance the houses were easily available. As such home loans were very easily available. But when time came to even off back the loan many defaulted which led to bursting of housing bubble and its refer led to financial crisis.Relaxation in rules led to large banks to gain their financial leverage and expansion of issuance of mortgage backed securities. wrong credit ratings Credit ratings were awarded inaccurately which led to an inflated balloon and when it ruin it led to financial crisis. Technological factors The cause of the crisis can be seen also in principles of technological development and in extensive economic waves ground on technological diversitys. Crisis and stagnation were a result of the end of the long economic cycle originally initiated by the Information and telecommunications technological revolution in 1985-2000.The market had been already saturated by new expert wonders (e. g. everybody has his own mobile phone) and what is more important in the developed countries the economy reached limits of productivity in conditions of existing technologies. Boom and collapse of the shadow banking scheme (SBS) The shadow banking system is the collection of financial entities, infrastructure and exercisings which support financial transactions that occur beyond the reach of existing state ratified observe and regulation.The core activities of investment banks are subject to regulation and monitoring by central banks and other government institutions but it has been common practice for investment banks to conduct many of their transactions in ways that dont show up up on their conventional balance sheet accounting and so are not visible to regulators or unsophisticated investors. The shadow banking system saw a boom but once investors started losing interest and no more wanted their f unds to be used in SBS and changes in business policies led to its collapse which ultimately led to financial crisis.