Question

On the financial crisis that began in 2008. What are the long-term ramifications of this crisis? How will this affect the future of business?

Answer 1

Ramifications means the effects that have been caused due to financial crisis of 2008. The ramifications were both short as well as long term. The long term ramifications would be as follows -

1) A large number of organisations went in crisis. Many shut down as there were not adequate funds available to run the business. The organisations ended and because of it GDP of the country had also gone down. It was very difficult to survive at that point of time. And because of shutting down, many companies ended prematurely.

2) A large number of companies shut, so also taking unemployment to a large scale. The employment rate was on the rise, suddenly because of the financial crisis the unemployment rate increased gradually. The unemployment rate was so high that people even committed suicide. No jobs were available. And the ones that were their, were at very low pay scale.

3) GDP of various countries as very low for many upcoming years. The GDP even at today date has not crossed what it was before the crisis occurred. Thus, growth of country has taken a major hit because of the financial crisis.

4) The general banking system took the hit. The financial crisis created a stir and confidence of people upon banking system especially housing loan system fell. No senior official went to jail in the crisis which was at a mammoth scale. This plunged the confidence of general public.

5) Import and export of countries was affected. The prime focus was on essential commodities. Luxurious items took the hit and many companies went into bankruptcy. The supply demand chain was impacted. Some commodities became very cheap while some became too expensive.

Affecting the future -

The financial crisis have affected the future a lot. Had the crisis not happened, the growth would have been exponential. The general standard of living of people would have been better. The inequality between the class of people would not have widened. The employment rate would not have taken the hit.

All such consequences could have been avoided had the house lending rate kept in check. The cash in rotation had reduced. The banks were in no longer a position to give loans. This was badly affected.

It also forced to create certain rules in terms of banking regulations. These regulations have kept a check and today we are in a much better scenario.

The share prices of companies took a nosedive. Some companies have still not crossed the price they reached before 2008. Some are barely surviving.

In short, the financial crisis of 2008 was a major hurdle then and is till a hurdle now. The after effects can be felt even today. The government had done its part. But the situation is still not back to normal. Some sectors are still facing the heat.

Financial crisis of 2008 was a major setback to economy of whole world.