the US has defended the
dollar as a global currency reserve
Contents contributed and discussions participated by Apiraami Pathmalingam
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#Acrisissoseveretheworldfinancialsystemisaffected - 0 views
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Banks borrowed even more money to lend out so they could create more securitization. Some banks didn’t need to rely on savers as much then, as long as they could borrow from other banks and sell those loans on as securities; bad loans would be the problem of whoever bought the securities.
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In Europe, starting with Britain, a number of nations decided to nationalize, or part-nationalize, some failing banks to try and restore confidence
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360 banks that received Treasury bailout funds and found that almost all were using the money in ways other than to lend
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The banking system virtually collapsed and the government had to borrow from the IMF and other neighbors to try and rescue the economy
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Eurozone countries such as Portugal, Italy, Greece and Spain are also facing potential problems, while Iceland has gone through many in the past.
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While the Western mainstream media has often hyped up a “threat” posed by a growing China, the World Bank’s chief economist (Lin Yifu, a well respected Chinese academic) notes “Relatively speaking, China is a country with scarce capital funds and it is hardly the time for us to export these funds and pour them into a country profuse with capital like the U.S.”
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Many of these debts were incurred not just by irresponsible government borrowers (such as corrupt third world dictators, many of whom had come to power with Western backing and support), but irresponsible lending (also a moral hazard) from Western banks and institutions they heavily influenced, such as the IMF and World Bank
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I found a flaw in the model that I perceived is the critical functioning structure that defines how the world works, so to speak.
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I had been going for 40 years or more with very considerable evidence that it was working exceptionally well.
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Central bankers’ belief that controlling inflation was necessary and almost sufficient for growth and prosperity had never been based on sound economic theory.
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World Bank admitted that developing countries have “come to the rescue” of the global economy, picking up the slack of the advanced economies which were hurt the worst by the financial crisis.
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developing world is becoming the driver of the global economy. Led by emerging markets, developing countries now account for half of global growth and are leading the recovery in world trade
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Bank believes the following factors help to explain this: Faster technological learning Larger middle-classes More South-South commercial integration High commodity prices, and Healthier balance sheets that will allow borrowing for infrastructure investment
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Definitions - 98 views
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Federal Funds rate
This is the rate that banks use to interact with each other overnight.
More information about it: http://useconomy.about.com/od/monetarypolicy/a/fed_funds_rate.htm -
Another word I fell across is quanitative easing, just as a summary. It is a government monetary policy placed to create cash flow by buying government securities. This is used to increase the liquidity of the banks. The banks would be able to lend more money and the cycle continues. The bad side to this is that there is a fixed amount of goods for sale, even though there is money in economy and this will lead to the inflation rate increasing. This would then affect other rates and other institutions which may cause disaster.
http://www.investopedia.com/terms/q/quantitative-easing.asp
Who Is To Blame For The Subprime Crisis? - 6 views
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The 2007-08 Financial Crisis In Review - 0 views
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Central banks in England, China, Canada, Sweden, Switzerland and the European Central Bank (ECB) also resorted to rate cuts to aid the world economy
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by 2004, U.S. homeownership had peaked at 70%; no one was interested in buying or eating more candy
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To keep recession away, the Federal Reserve lowered the Federal funds rate 11 times - from 6.5% in May 2000 to 1.75% in December 2001 - creating a flood of liquidity in the economy.
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prey in restless bankers - and even more restless borrowers who had no income, no job and no assets.
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environment of easy credit and the upward spiral of home prices made investments in higher yielding subprime mortgages look like a new rush for gold.
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Fed continued slashing interest rates, emboldened, perhaps, by continued low inflation despite lower interest rates
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the entire subprime mortgage market seemed to encourage those with a sweet tooth for have-it-now investments.
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trouble started when the interest rates started rising and home ownership reached a saturation point
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many subprime borrowers now could not withstand the higher interest rates and they started defaulting on their loans
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financial firms and hedge funds owned more than $1 trillion in securities backed by these now-failing subprime mortgages - enough to start a global financial tsunami if more subprime borrowers started defaulting
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could not solve the subprime crisis on its own and the problems spread beyond the United State's borders
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central banks and governments around the world had started coming together to prevent further financial catastrophe
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Fed Documents Breadth of Emergency Measures - 0 views
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the Federal Reserve opened its vault to the world on a scope much wider and deeper than previously disclosed.
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Without the Fed’s help, he said, “liquidity would have dried up even more than it did, asset prices would have fallen even more than they did, and economic activity and employment would have fallen further and faster then they did.”
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forced banks to restrict executive pay and reduce the financial burdens on mortgage borrowers as a condition of its aid.
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opened swap lines with foreign central banks, allowing them to temporarily trade their currencies for dollars to relieve pressures in their financial markets
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Without the Fed’s help, he said, “liquidity would have dried up even more than it did, asset prices would have fallen even more than they did, and economic activity and employment would have fallen further and faster then they did.”
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Fed Documents Breadth of Emergency Measures - 0 views
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the Federal Reserve opened its vault to the world on a scope much wider and deeper than previously disclosed
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released details of more than 21,000 transactions under the array of emergency lending programs and other arrangements it conjured up in response to the crisis
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The central bank, in essence, pumped liquidity, the lifeblood of credit markets, into the circulatory system of an economy that was experiencing a potentially fatal heart attack.
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“I think our actions prevented an even more disastrous outcome,” said Donald L. Kohn, who was the Fed’s vice chairman during the crisis. Without the Fed’s help, he said, “liquidity would have dried up even more than it did, asset prices would have fallen even more than they did, and economic activity and employment would have fallen further and faster then they did.”
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Fed should have forced banks to restrict executive pay and reduce the financial burdens on mortgage borrowers as a condition of its aid.
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European Central Bank drew the most heavily on these currency arrangements, the records show, but nine other central banks also made use of them: Australia, Denmark, England, Japan, Mexico, Norway, South Korea, Sweden and Switzerland.