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Financial Crisis Of 2008: The Role Of Greed, Fear, And Oligarchs

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INTRODUCTION During the 2007-2008, there a situation where the world facing the financial crisis also known as the global financial crisis which within this year it is considered by many of the economists faces the worst financial crisis. Based on the journal written by Cate Reavis on 16th March 2012 about the "The Global Financial Crisis of 2008: The Role of Greed, Fear, and Oligarchs" where it happen the major stock markets from the other country had plunged together with the Dow Jones Industrial Average it drag the credit market almost paralysis. The organization also have started to force the employees to be reduced and have to call off the capital investments. According to Simon Johnson who is a professor of entrepreneurship at the MIT …show more content…

That is why, to make sure the organization able to gain profit without reducing the cost or price of the product nor assets, they need to start to understand people mindset and behavior. The more organization understand to the people the more they will know why the previous action is not successful and it also causes the organization facing trouble. At the same time, the bank also should take an action too where they have to understand the financial statement of a person before approving the loan that they had made because this is also not for their own good but it is also to help the currency of the country to be drop down because if the higher debt of the country, the currency of the money will getting drop and it can cause the currency money of the country would not look by the other country. So, to avoid the financial crisis to repeat in the future, the organization should not reduce the price of the assets or product drastically just because of the buyers not able to make the payment but they can do by seizing their asset with collaboration from the bank and the laws. Meanwhile from the bank side, the bank should identify the person financial background not only from their job background, was blacklisted from other parties or not and their payslip but the bank also should do some …show more content…

It says that on 2006 is the year where the first sign that economy was in trouble. Which during this time, the price of the house was starting to drop down. This is happening because the misinterpret that if the housing market was given the top demand price from the consumers, the give more return at the sustainable level. The company did not realize that if there are many homeowners that can become question-based on their credit purchase. At the same time also, banks also allowed people to make loans 100% or more than the price of their new house. According to the Gramm-Rudman Act is the real villain where it allows the bank involved in the profitable derivatives transaction which that been sold to the investors. That is why mortgage-backed securities are needed as the safety and securities because the derivatives would not be satisfied and demanding more and more on the mortgages. There is a moment where the bank had cut out the original mortgages and had sold them to the wrong parties and the price of the derivatives also at the wrong amount. From the mistake, they had asked the insurance to protect them but the traditional insurance company which more known as the AIG does not have enough money to do the swaps. Due to the problem in swapping, the banks had worried and assumed that they had face the losses so they stop to borrowed to each other because they do

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