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How well prepared is the current financial ‘system’ to deal with crises? (Example)

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Name Institution Date Assignment Financial crises are not regular crunches. They occur as a result of the interplay of myriad complex concerns. Nonetheless in most cases they are not orchestrated by natural occurrences and thus can be easily avoided. A majority of the ones that have ensued in the past have portrayed common loopholes. The first fundamental reason entails excess leverage. The factor has been defined to be at the epicenter of most of the crunches. Such clouts are connected to off-balance-sheet mechanisms that include derivatives. For that reason lawmakers and regulators find it difficult to impose guidelines on the same. Liquidity problems are second in the line. Financial institutions have often overestimated or exaggerated their liquidity muscles by using accounting gimmicks (Chwieroth 2010 124). Some banking institutions also adopt a wrong perception where they view themselves as too large to fall. The complexity often leads to a path to trigger a more severe catastrophe are yet to be addressed. For instance some nations still make decisions that do not address system-wide issues as well as market failures and externalities. Other decisions made on a short-term basis may have adverse implications in the long run. Fundamentally governments and global financial bodies should work on making regulations that promote long-term economic stability rather than fostering unsustainable growth. Such interchanges will facilitate the realization of the hidden risks and thus create balance mechanisms. Bibliography Chwieroth Jeffrey. The Crisis in global finance: Political economy perspectives on international financial regulatory change. In center for international affairs (corp.ed). Beyond National boundaries: Building a world without walls. Academy of Korean studies Press 2011. Obrien Robert and Marc Williams. Global political economy: Evolution and dynamics. Basingstoke: Palgrave Macmillan 148-178 2010. Schwartz Herman. State versus markets: The emergence of a global economy. ST. Martin Press 2000. [...]

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I would like to start by pointing to causes of many financial crisis which tend to be largely circumstantial and as reactions to the developments in the world economy . If we look at the Great Depression, we see that the cause was mainly due to an absence of a hegemonic power, i.e Britain and the western nations being mired in post war reconstruction efforts. Countries resorted to protectionist policies that later failed and led to WWII. 200 words The collapse of the Bretton Woods system following the oil crisis. 100 words The imbalance of the dollar and US gold reserves and its effects on the importance of the dollar. 100 words The Asian financial crisis. 100 words The rise of other global actors (BRICS) eclipsing to a certain extent the hegemonic role of the US. 200 The 2008 economic crash (the subprime mortgages). 100 Conclusion: Due to an ever evolving international system, the current financial system is no better prepared now than it was in the 30’s . However, “lessons” can be learnt from previous crisis but as some world events can be happen very suddenly (such as the oils crisis in the 70’s and the 2008 crisis), the recent events such as Brexit or the election of Donald Trump in the US have added to the complexity and the unpredictability of crisis yet to come. 300 words

Subject Area: Economics

Document Type: Reports

This project has already been completed by one of the Studybay experts. The client rated this project:

Project's rating is 5/5

Price $25

Words 550

Pages 2

Completed in 17 days

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Timely, accurate and concise work. Thanks

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03.27.2018

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