Major Markets Worldwide Face Jeopardy
Heba El Sahn
Everyday new statistics are coming up about the economic meltdown that is taking place worldwide. People are buzzing about the actual crisis or its result on the present markets. The poor are suffering more and more as the days go by because of the increasing food prices. Successful business men and landowners are also feeling the blow and are trying their best to protect their assets. The meltdown is a serious issue which threatens investors and affects the population all over the world.
One needs to know what caused this problem in order to understand the extent of its effects. For the past years before the crisis, interest rates have been in their all-time lows. This occurred when there was an increase in money supply and thus more money has been able to go around. When interest rates are low, this generally causes the economy to develop since more people and institutions can have access to money easily. This in turn, gets them to spend more freely and so increase the growth of the economy. But in the case we are dealing with, the interest rates went down to historical lows, and this got the usual economic growth to backfire.
When the cost of borrowing money decreased, financial institutions got to have a money surplus. They started to offer loans to risky borrowers who were less likely to pay them back. While this was all right for a time, (even getting the economy and the institutions to profit), after a while its negative effects started to show. The practice started to spread more and more, with little regulation, and as expected these risky borrowers were not paying their loans. To balance this, lenders charged high interest rates. The high interest of course pressures the borrowers and makes them more likely not to pay their credit.
The consequence of the current economic meltdown is sending shockwaves worldwide. The US received the hardest hit by putting many of its vital companies in jeopardy. The US is now facing a crashing stock market alongside a rising unemployment rate. Iceland is currently in an economic depression, and economists state if the case worsens the country might be facing national bankruptcy. Many of the world’s leaders are doing their best in coming up with a solution. The French president, Nicolas Sarkozy, is proposing a series of summits to be held to figure a way out of the current calamity.
The economic meltdown is a serious problem that until now no profound solution has been found to. Economists are currently stating that this crisis will not be solved anytime soon. The economic recession will go on for around two years. On the good side, however, inflation will decrease. To solve this predicament, key actions must take place. Liquidity must remain so that can promote investment. Also, there must be better regulation of the banking world and its activities. The government has to take charge with the economical and financial actions of the country at least until the crisis is under control. The election of Barak Obama as president got many entrepreneurs to become hopeful. They trust that he will take the right steps and measures in trying to fix the economic meltdown
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