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The 2008 recession, bailout and conclusion
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   Topic: The 2008 recession, bailout and conclusion  CONTENT: Abstract 1.   Follow up to the crisis and recession in US 1.1.   Forms of financial crisis 1.2.   Causes of the collapse 1.3.   The Minsky crisis 1.4.   Financialization and liquidity 2.   Failing the bail out Conclusion    Abstract This paper talks about the most recent economic crisis. Through the paper it is attempted to encompass in short form the important moments prior and with the crisis and consequent bailout. As a finale a conclusion is added that best describes the writers stance on the topic and most important issues on causes and consequences of the most recent “Great Recession”    1.   Follow up to the crisis and recession in US Prerecession period following up to 2008 recession already known as “The Second Great Recession”, second to the first one which happened in 1930s , was the time of great expansion. This expansion was short lived but very intensive, especially in years 2006 and late 2007. At the heart of the expansion was the banking sector in both financial and economic sense. Banking activity followed the growth of the expanding economy and growth of GDP, but in two years prior to the recession the banking activities became too risky and due to the lack of regulative policies it has, along with other factors that led to 2008 recession. The question of financial stability is central to the assessment of the financial development and growth of any country. The crisis are in most cases signals of financial instability and failure of the system to work properly, which very often can have serious economic and financial consequences leading to recessions and depressions. These phenomena are also very expensive as they lead to many bankruptcies among households, companies, and financial institutions, which again lead to social deadweight loss and debt incurred by the fiscal costs from necessary government interventions, known to reach over 10% of GDP. (The Ascent After Decline 2012) For this reason especially it has become important to review the banking practices and implement new reforms that are supposed to bring better results with financial stability and economic stability. The reforms will be presented later in the text with a specific chapter. 1.1.   Forms of financial crisis Financial crisis can take different forms. In recent history most crisis have been classified in the following categories: (The Financial Development Report 2012) a.   Currency crisis  –  the crisis that occurs when a fixed or semi fixed exchange rate regime becomes unsustainable and the peg, or the effective peg has to collapse b.   Sovereign debt crisis  –  the crisis that occurs when a sovereign government is unable to service its debt obligations in time and in full, and thus formally or informally defaults on its debt c.   Systematic or financial crises  –  occurs when a significant number of financial institutions become financially strained and need to be either closed down, merged or restructured d.   Systemic corporate crises  –  occurs when a significant portion of the corporate sector is financially strained e.   Systematic household debt crises  –  occurs when large number of households become unable to service their debt in form of mortgage and customer credit
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