The Financial Crisis: There were several causes of the Financial Crisis. One exp

Question

The Financial Crisis:

There were several causes of the Financial Crisis. One explanation can be found here (https://www.youtube.com/watch?v=bx_LWm6_6tA&feature=youtu.be) Another explanation can be found at a site built by the Federal Reserve Bank of San Francisco (http://sffed-education.org/econanswers/portal.htm). Here the FRBSF describes not only what caused the crisis, but also the response by the Federal Reserve, the recovery, and regulatory reforms undertaken to try to prevent a future such catastrophe. Here (https://blog.euromonitor.com/2014/11/the-recovery-from-the-global-financial-crisis-of-2008-missing-in-action.html) is an evenhanded report on the US economic recovery since the crisis.

On the basis of this information, and any other academic-level sources you may cite, do you think the US economy's and banking system's ability to withstand a crisis has improved since 2008-9? Why or why not?

Explanation / Answer

Crisis of 2008-09 has changed a lot of things, prior to that period and after that crisis a huge change has come in.

1. More people have started to go for enterprenuership rather than employement, people want to show their skils and hence started going for self employement. That's why the employed group is aging rather than before which makes an impact on producitivty.

2. second largest factor of slow GDP recovery is population, due to huge rise in population per capita increase in income is reducing as population goes high. and this explosion in population makes worst effect in initial years as ratio of depenedent person rises due to more people of lower age group (0-20 years)

3. the costs of bailing out banks and the decline in tax revenues due to lower economic activity or fiscal stimulus attempts worsen government finances. In the case of Southern European countries, such as Italy and Spain, the initial crisis led to growing concerns about the sustainability of public finances. The result was a sovereign debt crisis on top of the original recession. The increase in sovereign debt risk premia then fed back into further increases in private sector costs of financing and more economic uncertainty. Fiscal cutbacks attempting to stabilise sovereign debt risk premia caused even bigger contractions in economic activity in the short run. The compound effect of two financial crises with a few years delay has contributed to output losses in Southern Europe of a magnitude matching the great depression of the 1930‘s.

4. Economies are more vulnerable now and i think the ability of US Economy and Banking system to withstand another crisis has declined a lot and major reason is globalisation too, cause all the countries are jointly responsible for economic growth and as per current policies of trump there soon be a trade war which can adversly effect the economic growth of US.

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