Gdp Ratio

19. International Financial Crisis For the last almost 30  years neo-liberalism acquired hegemonic influence over economic thinking at the globose level. It acquired the status of mainstream economics, is being used by the World abhorrence (WB) and the International Monetary Fund (IMF) in drawing up conditionalities for the Less Developed Countries (LDCs). The recent financial meltdown has powderise the neo-liberal ideas almost over night. Writing in the New Statesman, Martin Jacques states, The semipolitical class, from New Labour to the Conservatives, is standing naked. They are still clinging to the wreckage of their erst speckle(a) ideas while acknowledging in the next breath that these no daylong work. (New Statesman, 13 February 2009) The crisis started with the US trapping market, where the interest rates had been kept secondhand over a long time ascribable to which there was a tremendous ontogenesis in sh oot for housing. Fannie and Freddie were devil of the largest housing companies catering to this demand, in addition to new(a)(prenominal) smaller companies. investment funds banks, pension and hedge funds comparablewise got into housing finance. With the IT revolution in full swing in the US and with the help of banks new financial products were prepared and exchange to institutions involved in housing finance.

The very intense disputation among the housing companies led to the breakthrough and preparation of new products like the Adjustable Rate owe (ARM), where the interest rate was low initially, but enh anced later. This diversity of lending has ! been termed as sub-prime lending. When the federal Reserve enhanced the interest rate as an anti inflationary measure, increase in interest on sub-prime loans caused increase in debt of people who had undertake sub-prime loans. And this led to default on these loans, causing colossal foreclosures and confiscation of defaulters houses by the banks. This caused a massive increase in contribute of houses which crashed the housing market. As a result of...If you want to check a full essay, sound out it on our website: OrderCustomPaper.com

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