Essay on “Is the Global Financial Crisis over?”
The media has claimed that the global industrialist economy has been in a revival stage for approximately two years (Desai, 2011). However, there is still a doubt that the global financial crisis that began in 2007 is far from over.
Though the proportion of profit has augmented penetratingly since 2009, as well as the accumulation of profits is at record levels; the significant catastrophe related to mass unemployment all over the globe still persists in various economies (De Cock, Vachhani and Murray, 2013).
A large number of research studies have attempted to confirm whether the global financial crisis is over or not.
Assessment of all these studies showed that though the economy, as a whole, evidenced certain improvements, no one study indicates that the global financial crisis is over now (De Cock, Vachhani and Murray, 2013).
Under such circumstances, this particular argument base study is trying to develop a view about this particular aspect.
The unemployment rate is one of the major instruments for assessing whether the global financial crisis is over or not. Therefore, if the unemployment rate is considered one of the parameters, then it can be said that the unemployment rate in the European zone has hit a new record high (Desai, 2011).
In particular, Greece’s unemployment rate has reached 28 per cent, and the youth unemployment rate has reached 64.1 per cent (BBC News, 2014). Among European nations, Bosnia and Herzegovina has the highest unemployment rate, 43.77 percent.
Most of the nation, evidenced the unemployment rate of above 10 percent (Tradingeconomics.com, 2014). The number of job seekers increased significantly in 2013, which was even higher than in any year during the last financial crisis (Hijzen and Martin, 2012).
Here, the example of France can support this argument as in France, the number of job seekers during 2013 was 3.303 million, which was an all-time record high (Durden, 2014).
If the Asian context is considered, then also it can be said that the level of unemployment rate has increased to a new high. In practice, the level of unemployment rate in Australia has risen to a new record level, which is the highest in the last 10 years (De Cock, Vachhani and Murray, 2013).
Again, if the proportion of bad loan is considered, then it can be said that the trend gradually increases over the time frame. In fact, the European nations evidenced record time high year to-year bad loans (De Cock, Vachhani and Murray, 2013).
For example, the level of nonperforming loans to total gross loans of Greece during 2013 was 31.3 per cent; for Italy, it was 23 per cent, etc. (Wdi.worldbank.org, 2014). As various economists have discussed, the level of bad loans can lead to efficiency issues for the banking sector(Hijzen and Martin, 2012).
Now, it is the fact that the success of the global banking industry largely influences the recovery of economic situation. Therefore, if the level of non-performing loans in the banking industry increased over the last two years, this indicates that there is no sign of recovery from the global financial crisis (De Cock, Vachhani and Murray, 2013).
It is also the fact that during last two years, the volume of industrial output declined to a significant level. The reduction of the industrial output of Italy by 0.9 percent in December 2013, has supported this argument (Business Insider, 2014).
Not only that, but Greece’s industrial output decreased by 0.7 percent during the last fiscal year (Unido.org, 2014). The industrial output index is an indicator of how the respected economy has utilized its capacity of production (Kolb, 2011).
The overall industrial production rate edged down by 0.1 % in August 2014 (Federalreserve.gov, 2014), considering 2007 as the base year. This indicates that in terms of industrial production, the global financial crisis is not over yet, but it has still remained below the 2007 performance level.
If the number of business failures is considered as another indicator of whether the global financial crisis is over or not, then also it can be said that there was a mixed result of success and failure (Kurtzleben, 2013).
In European nations such as France, the number of business failures has increased during the last year subsequent to the global financial crisis (Durden, 2014). However, the research also explored that certain business organizations, like Amazon, Netflix, Facebook, etc., evidenced noteworthy success during the last fiscal year (Kurtzleben, 2013).
The housing price bubble is another important aspect of assessing whether the global financial crisis is over or not. There are also mixed results in terms of the housing price bubble. Research showed that nations like Australia, Singapore, Japan, France, Germany, etc., evidenced an increment of the housing price level (Ojo, 2013).
Although the house price in Australia is still lower than several economies like Singapore, Japan, France, Germany, etc. (Desai, 2011), the project housing price in Spain reduced by 10 to 15 percent during the last fiscal year (Durden, 2014).
Further, there are certain other European nations where the demand for dwellings has been frozen over the last two years(De Cock, Vachhani and Murray, 2013). So, from this point of view, it can be said that in terms of housing price, though certain economy, evidenced better result, subsequent to global financial crisis, the housing market all over the globe is not yet reached to its previous position prior to 2007(Saliba, 2013).
The level of inflation rate must be treated as the most significant indicator of whether the global financial crisis is over or not(Hijzen and Martin, 2012). Various studies related to trends in inflation rate indicates that the economy as a whole is in a deflationary cycle.
The latest annual inflation rate for the United States is 1.7 percent, which explored the fact that the level of inflation rate is not certainly raging out of control(US Inflation Calculator, 2008). But the fact is that it is still showing an upward inclination, which is not an indication that the global financial crisis is over now(Nutting, 2014).
From the above argument-based assessment of the economic standpoint of various economies, it can be said that subsequent to the global financial crisis, no single problem caused by the global financial crisis has been resolved. In fact, the level of global debt has risen by 30 per cent, considering 2007 as the base year (Yurtsever, 2011).
It is noted that the level of credit access in various forms all over the globe have reached to its elevated level, since the global financial crisis.
This is a major warning towards the economy as whole. At this point, as the US Federal Reserve is aiming to wind down impels and starts to deplete dollar liquidity from international markets, an inflexion position that is weighed down with risk could go away imperfectly wrong in the next few years (De Cock, Vachhani and Murray, 2013).
As a consequence, it can be predicted that the current situation will become even worse than it was during 2007. Further, several imbalances remain in the marketplace, which came into the picture just after the global financial crisis (Hijzen and Martin, 2012).
Both the private and public debt levels as a proportion of the nation’s GDP remain major issues (Evans-Pritchard, 2013). At the same time, if the interbank credit level is considered for discussion, then it can be said that over the last fiscal year, the level of the interbank credit level reached the highest level on record.
Offshore start-up business entities all over the world (including developing nations like China, Brazil, and India and developed nations like European nations) have faced significant debt issues.
Also, subsequent to the global financial crisis, the risk level of individual economies emerged to an extreme level. To mitigate this risk level, various economies started securitizing their existing processes.
Now, the process of securitization incorporated several apparatus that causes a further issue towards the economy (De Cock, Vachhani and Murray, 2013). Taken for example, the banking industry has started to rely on hedge fund as they thought that they now understood how to take on risk as well as produce money more efficiently.
At the prior stage, as they were able to generate more money by considering the additional risk in terms of hedge funds, they claimed their personal inspection that they had it figured out.
At the same time, they also thought they had broaden all their risks efficiently (Desai, 2011). However, during the last two years, when it actually went erroneous, it became worse than ever (De Cock, Vachhani and Murray, 2013).
The assessment of the reason behind the global financial crisis in 2007 explored the fact that the failure of the banking industry is the most important reason.
However, if the recent market trend is being considered here, then it can be found that the strength of the too big to fail banks are in the relatively more critical position than ever (De Cock, Vachhani and Murray, 2013).
Research has shown that prior to 1985, in the United States, there were over 18000 banks operated in the market place. Now, standing on the 21st century, it is noted that near about 6891 banks are operating in this banking industry (Flynn, 2012).
This directly indicates that over the time frame, over 10000 banks have shut down their operation (Theeconomiccollapseblog.com, 2014). The number of the largest banks in the industry significantly reduce to below the 2 digits.
Therefore, if any of the largest banks fall down, the economy as a whole will not only again experience a crisis but also become even worse than ever (Hijzen and Martin, 2012).
Under such circumstances, if the question “is the global financial crisis is over?” is considered once again, then there will be two types of conclusion.
According to theory, the economy as a whole, evidenced a cyclical process of boom and beer period. So, from this point of view, it can be said that the global financial crisis is over as most of the economy, evidenced more or less improvement of its position subsequent to 2007, based on basic indicators over last two years.
However, if the long-term aspect is considered here, then the above analysis indicates that there is no sign of recovery; rather, it is the beginning of the financial crisis (Globalissues.org, 2014).
Therefore, it is becoming apparent that over the six year period after the global financial crisis, though the global economy as a whole has evidenced several transformations to recover from the crisis situation, still there are so many facts that indicates much more concern is required to recover from it entirely (De Cock, Vachhani and Murray, 2013). It is thus true that the answer of the question “Is global financial crisis over?” is “no”.
However, it is also the fact that there is no such policy as well as economic basis, which definitely able to conclude that the economy as a whole evidenced a normal pattern of economical growth.
So, from this point of view, the answer to the question will remain same, over the time frame. But, if the relative measurement is considered as the base point, then certainly there will be a period, when it can be said that “yes”, the global financial crisis is over now.
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