Question

based on your deep understanding of ((Why Do Financial Crises Occur and Why Are They So Damaging to the Economy?)). do you think the current crisis is similar or different of economic and financial crisis in 2007-2008, why?

**in your way to solve the question : compare the causes of the two crises, and if you do an online search please write your refrence  

Answer 1

A financial system is the combination of all financial institutions like stock exchanges and central banks, which acts as intermediaries in financial transactions like lending and borrowing. Financial crisis is a situation under which, the economy  faces a total colapse of the financial system.  

The following are the factors which results financial crisis.

i.liverage

ii. liquidity

iii. conflict of interest

iv.Taxes and subsidies

v.governace

Due to the financial crisis world economy has to face a negative growth in gross domestic production (GDP), which makes a major share of total revenue of the world economy. The reason behind this is unemployment and related issues.  

Reduced foreign investments and the reduced demand of labour intensive goods are other impacts of financial crisis. Even though the financial crisis originates in the developed countries, it effects all over the world in some or other way, especially in developing countries. Deflation is another economic challange.

The Global fianancial crisisi (2007-2008) is a major financial crisis. which affected the world economy very badly. Irnternational trade declined and Economic slow down was the end result. Lack of investor confidence emerged during this period and the decline in credit availability are the  major reasons behind this financial crisis. Several bank failures and several business failures were the major issues.  

The global financial crisis also called "Great Recession". It actuallaly started from the housing market bubble, loans in default bundled together. Banks and other financial institutions paid loans at low interest rates to the home owners could not able to repay the loans. Thd us housing market was deeply affected becuase of the crisis.  

Current financial crisis

Due to the Covid - 19 background, due to the repeated lockdown and other covid - 19 related issues, all financial institutions, banks, global markets, business organisations, etc. are remaining closed for the last two quarters of this financial year (2020 -21). Financial issues like job loss and negative gross domestic production (GDP) are indicated in the late 2019 itself.  

According to world economists, financial problems created by Covid - 19 is three times bigger than 2008 financial crisis. It has affected even the richest countries very hard. Airlines and hotels and tourism are the industries it affected very badly. Skilled and labour intensive indtrial sectors also had to suffer a lot due to the Covid - 19 pandemic.