In the past several months, news have headlined the growing economic and financial woes in the United States and subsequently, the impact of the United States’ own crisis to the rest of the world. What would serve as a potentially American problem would turn out to be a global challenge: as the ongoing financial crisis has been pointed at the roots of sub-prime lending activities in the United States, the drama further unfolds how the global financial system has been indeed “globalised”.
This further shows that the financial systems in one part of the world have its underlying strong connections with other financial systems in another; for instance, who would have thought that what comes with the declaration on the American financial downturn in September 2008 Iceland would suddenly declare itself on the verge of economic collapse a month after?
It is inevitable that fingers are pointed at the cause of the current global financial crisis as its impact has been tremendous. Other than Iceland a string of similar cases would emerge: news have identified countries that have been in trouble as affected by the ongoing crisis, with cases of recessions and bankruptcies, among others. The impact, interestingly, comes in many forms, from the falling housing markets to declines in production activities due to the drastic fall in demand.
Australia and New Zealand have been also affected as their currencies and markets have suffered as a result of decline, in addition to a general atmosphere of threat as international economies start to experience negative growth; however, Australian Prime Minister Kevin Rudd assured that Australia would survive the crisis, unlike its other counterparts.
Although some nations like Australia have guaranteed fundamental stability despite the crisis, there are still a number of issues that need to be addressed, especially as to how the financial institutions have found themselves in critical hot water. In the United States, the situation has been grim: many financial institutions, from banks to lending companies, have been accused of greediness.
The sub-prime lending issue has been one of the most significant terms that have emerged from the crisis, thereby highlighting how these institutions would go as far for the purpose of profit. However, on the other side of this issue is the case of international financial regulations. The current global financial crisis, evidently, is not just the first of its kind; this is to say that even past financial crises have demonstrated the relationships of many markets to the point that one specific crisis can spread like wildfire, affecting many other nations and economies.
Hence, the global financial crisis also asks to examine the current international financial regulation systems, especially as markets and economies have now become more globalised. The sense of responsibility should be also looked at especially as the actions and behaviours of one sector can potentially affect millions; who would have thought that sub-prime lending in the United States would cause millions of jobs al over the world?