The financial crisis in developed and or developing countries
Write about the USA financial crisis.
The financial crisis in the US begun the year 2008, affecting the global financial system pushing the world commercial banking to almost collapse. Resulting in a lack of consistency in the country, affecting both business and economic turmoil; thus, the economic condition of a nation was negatively affected. It was transformed through financial flows and international trade, resulting to slow monetary movement. The global monetary fund registered a decrease in economic growth, leading to a high risk of inflation, thus shrinking the commercial production. When the price of commodities or other goods and services increased, it entirely affected the economy, impacting to a high cost of living, affecting the entire nation. This lead to a lack of employment, a decline in business, high loss of mortgages, corporate and government bonds yields were also affected. The rise in the price of commodities leads to a decrease in the value of dollars since the purchasing power had risen due to an increase in products hence a decline of economic growth affecting countries’ per capita income. The state was unable to produce enough goods for its consumers and businesses due to limited resources in the country.
The USA is a developed country, experienced a deficit in new emerging industries. Still, limited or scarcity of resources affected their businesses negatively affecting the stock market of the country (Lehkonen,2015) financial crisis was as a result of government spending more than what it was gaining from the taxes collected and earned from the citizen of its nation. This deficit resulted in to decrease in economic productivity and growth of the country. When the government spends more than its actual earning, the economy declined due to a reduction in its revenue. Instabilities of exchange rates in a country lead to a reduction in the value of the currency negatively affecting the economy, resulting in a decline in the production and growth rate of the nation.
The crisis significantly changed the outside world, which led to collapsed businesses leading to a reduction in consumer wealth. Economists claimed that the crisis affected the manufacturing sectors negatively, which led to a decline in industrial production affecting the exporting industries, which led to a reduction of economic output all the world. The rate of unemployment rose all over the world since many jobs were shutdown. The loss of employment affected the financial market due to a decline in the stock market worldwide.
As a developed country, we will always come up with solutions to every crisis; this will help our economy as a nation to be stable. A developed nation does not concentrate on the crisis it faces. Instead finds it more relevant to solve its problems to improve the financial flow of the country. The government needs to create an annual budget to track its expenses so that it will familiarize with its every line of the budget; this will help its financial minister be cautious on what to spend and how. Decrease in the overspending of the government money funds since it will be aware of where to save and where to spend less, the government will spend less on what it’s gaining from taxes, resulting in surplus in the economy (Fetai,2015).
The economic growth of the country should be boosted through the high demand for the commodities to increase the supply in the marketplace, thus high monetary supply. Exporting more than importing improves the economic growth of the nation as a result of reducing the value of exchange rates, leading to an increase in the competition of the economy since there has been an effective fall in the exchange rate. Discount in excessive borrowing for their consumptions resulting in a reduced government imbalance leaving the country with a balance in trade with this, and there will be a reduction in trade and payment deficits in the US, thus high economic growth of the country. Discount on the cost of living, the demand for the products should be distributed effectively at a lower price, which will attract more consumers, hence a better purchasing in power.
Reference
Lehkonen, H. (2015). Stock market integration and the global financial crisis. Review of Finance, 19(5), 2039-2094.
Fetai, B. (2015). Financial integration and financial development: does economic integration matter?. European Research Studies, 18(2), 97.