Economy 101

What are the causes of the global economic crisis? There are many causes, and it’s the addition of all that creates the crisis. The crisis has officially started on September 2008 with the failure, merger, or conservatorship of several large United States based financial firms. Like dominos, it has been spread with the insolvency of additional companies and declining stock market prices around the globe.

One of the main reasons was the decline of the property market. It has been caused by the cupidity of bank directors, which were money thirsty, that gave large mortgage to high risk people. The personal bankruptcy of a lot of American citizens because they were unable to pay their debts has made impossible the payment to the lenders.

Another reason is the rise in the oil prices. The most requested energy rise had a directly or indirectly impact on consumers and enterprises. The speculation also dramatically raises the price of staple food, which started the global food crisis. For example, the rice price has almost doubled between 2006 and 2009.

The American government adopted a re-launch plan of economy that will cost 700 billion dollars to the American citizens. Because our economy is based on credit, the main goal of this plan is to inject money into banks, which will decrease the conservatorship, and then the consumers will borrow with low interest and invest in the market. Investing in the markets has a major impact because it increases rollup in the economy.

Finally, this financial disaster is a little complicated because there are too many facts to consider. This is why it’s easy to misunderstand it. I explained my own understanding of this crisis based on news, on economical magazines, and Scholar Google. There are a lot of different versions and I tried my best to find the most credible sources.

~ par tyalex le 26 mars 2009.