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Financial Crisis 2008

 Table of Content
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◈ Reasons for Financial Crisis

◈ Developments of Financial Crisis
◈ Consequences of Financial Crisis
◈ Short Term and Long Term Consequences
 Reasons of Financial Crisis
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◈ Flexible monetary policy of US extended

for a long period.
◈ Formation of Real Estate Bubble took
place.
 Reasons Continued
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◈ Lower Interest Rates

◈ Increasing the borrower to buy more
houses
◈ Prices of the house started to rise
◈ Subprime Mortgage rapidly developing
 Outbreak of derivative securities
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◈ MBS + CDS = closed relation between the real

estate market and financial market. (Money,
Banking, and Your World)
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 Reasons Continued
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◈ Burst of Real state Bubble

◈ Reduction in the prices of the house
◈ Value own house couldn’t offset value of
loans
◈ Reduction in the prices of Bond and Stock
 Development of Financial Crisis
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Bear Stearnes Fanie Mack and FEB spent
was forced to Freddie Mack around $200
sell itself were billion as a
To JP Morgan Nationalized lifeline for these
for $10 per companies
share
 Development of Financial Crisis
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• US economy fell into a recession of around

0.3%
• Japanese official announced a fall in recession
with continuous negative growth.
 Consequences of the Financial Crisis
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◈ Financial System of the Country Collapsed

◈ Prices of most of the commodities were plunged
◈ Interest rate were destabilized
◈ Real estate prices plumaged. (Bartmann, 2017)
Country Interest Rates 2007 Interest Rates 2008

America 5.35% 0.25%

England 5.5 2.00%

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 Consequences of Financial Crisis
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◈ Reconstruction of Financial Corporations in
European Countries. (Allen, 2009 )

◈ Fiscal Policy – reducing tax and increasing the

subsidies
 Consequences of Financial Crisis
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◈ Lead to the Financial Crisis in Asia

◈ Goods Price Fell
◈ Investors were discouraged
◈ Anti Globalization
 Consequences of Financial Crisis
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◈ Undercover Banks
◈ Public Debt
◈ Lack of Structure Reforms
◈ Vulnerable Economy
 References
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Allen, F. (2009 ). An Overview of the Crisis:.

Bartmann, R. (2017). Causes and effects of 2008.

Money, Banking, and Your World. (n.d.). The Saylor Foundation.