Global Financial Crisis in Context Essay Example | Topics and Well Written Essays - 1500 words

Global Financial Crisis in Context - Essay ExampleThere is the general consensus across the globe that the 2007-2010 global financial crisis (GFC) is the worst to have hit the humanity economies ever since the famous Great Depression during the 1030s. To some this crisis has grown to be know as the Great Recession of the time. One of the notable effects of the recent global financial crisis was brought to the fore in terms of failure by the worlds key businesses, significant decline in the wealth among consumers, as well as massive financial commitments by the various governments. In the overall, the aforesaid(prenominal) effects culminated into significant reduction in the economic activities amongst nations. The said financial crisis has its cradle in the bursting of Americas housing babble out. In particular, this housing bubble experienced its peak during the 2005- 2006 period. Immediately afterwards, there was a general increase in the Adjustable Rate Mortgages (ARM) and subp rime default rates. As it is put forward by Taylor and Akila, (2009), a resultant increase in incentives of loans for example, fair easy terms as well as long-term trend of increasing prices of housing. As a result, borrowers had been motivated to take difficult mortgages with the hope of being able to quickly refinance them at favorable terms. However, with the increasing interest rates, prices of housing began to drop although pretty during the 2006-2007 period in several parts of the United States of America. Consequently, refinancing became much more difficult. This provided the much needed impetus to the increase in foreclosures and defaults due to the expiry of the simple initial terms.