How the US-made crisis affected the Global Economy

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In my last post I talked about greed and its involvement in the financial crisis. I want to switch gears and talk about globalization and the emerging challenges that the world’s economy faces in my final paper. In the United States, we have yet to see evidence of a sustained recovery in the housing market. Mortgages delinquencies for both sub prime and prime loans continue to rise along with foreclosures. The commercial real estate sector remains troubled. Two particular uncertainties include the phasing out of government programs that has propped up demand, and the houses working through the foreclosure process potentially resulting in an increase in supply of houses. Much uncertainty still remains as to whether mortgage rates will stabilize and not jump as a result of the phase-out, causing decreased demand for housing. The fate of the homes in the foreclosure process is another uncertainty. If there is a surge in foreclosures, there will be a significant increase in supply of houses on the market, which could damage prices and hinder recovery. Given such uncertainties in the economy the United States faces significant challenges.

As an advanced economy with slower growth, the United States will face difficulties of timing in phasing out stimulus programs. Nevertheless, this US-made recession has affected the entire world’s economy. In my final paper, I will analyze how this recession has affected the world and what programs have been developed to help overcome this recession. Financial institutions need to understand that their actions not only affect the United States economy, but the world’s economy as well. The era of new global financial challenges that the world has arrived at has indeed highlighted not only the interdependencies we see occurring in a globalized world, but also the deficiencies that plague the current world financial systems and institutions. Must global organizations set the standards and redefine the role of financial institutions?  How can global organizations meet the needs of the many challenges that became apparent after the 2008-2009 financial crisis? Should countries collaborate with each other to make these reforms? These are questions that I hope to answer in order to come to a discovery of a solution at large.


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