Question

List and discuss the various reasons that contributed to the financial crisis that occurred in 2008 in USA please answer creative do not copy and paste from any website this answer also already answer by many writers still want to creatING ANSWER  

Answer 1

Various reasons that contributed to the financial crisis which occurred in 2008 in United States of America are as follows-

A. Irrational asset prices which word not sustainable and this irrational asset pricing was leading to fear of missing out kind of a situation which led to higher number of investors getting trapped

B. Credit rating agencies issued with fraudulent credit rating to different securities which were combined with different other securities so there was ambiguity of credit rating and issuance of substandard assets

C. There was very high liquidity in the market and very high use of debt in order to ride the bullish rally and people were mortgaging their homes in order to raise money and invest into the market.

D. Justifications of irrational and exuberant asset prices by irrational logics which did not support the prices of the Asset fundamentally.

E. the fundamental valuations and intrinsic valuations of securities were will lower than the market price of the securities and it was reflective of high amount of overpricing which was bound to be corrected once the market became efficient so this price discrepancy cannot sustain in the long run and it was eventually equated with the market crash.

F. Derivatives market were not properly regulated and it lead to mismanagement of the prices of the Asset and it led to a high degree of panic when the market crashed

G. it can also be attributed to bad monitoring by the central banks because they stimulated the economy to such extend beyond which further stimulation cannot be possible through the monetary policies.