The current global financial crisis which became prominently visible during September of 2008 is considered by most economists and world leaders the worst kind since the Great Depression. It is equated with the failure in conservatorship of the many financial institutions based in the United States of America. The US is considered the most powerful and the wealthiest nation or country in the whole world that every change that occurs can affect the current status of different countries.
The failures committed by the US financial firms have evolved into global crisis affecting the financial stability of different continents like Europe and Asia. In Europe, bank failures and decline in various stock indexes are experienced. Also a large reduction in market values of equities and commodities in the world market occurred. Around the world, the United States of America is very influential and is the most prominent country in the world. One proof of this is the currently finished presidential election of 2008.
Each and every nation in the world had their bets on who is going to attain victory between the two candidates running for office. The whole world is not taking their eyes of on who will win between John McCain, a white candidate and Barrack Obama, a black candidate. Not only the people of the US are excited in the incoming results but every person, mostly world leaders, are anticipating on the victory of the republican and the one who is craving for change.
McCain is the presidential candidate that every person sees as someone who will continue the way current president George Bush rules the country while Obama, the other presidential candidate who claims of bringing change in the way the US should be governed. Every community supporting both presidential candidates becomes very vocal on who to put into office. But, the end of every fight comes and the black community and the rest of the United States have spoken putting someone who is craving for change in the position making Obama the first black president of the most influential nation worldwide.
Obama attaining victory has inspired a lot of people, making it possible for every person to gain what they mostly wanted and in this moment, change is still possible or change can still be perceived. What is the connection between the current global financial crisis which is considered the major crisis after Great Depression and the just finished presidential elections? Well, the effect of every step that the country is taking affects other countries’ situation. On how the new president will govern the country and how he will offer help to other countries is what every nation is expecting from the most prominent nation in the world.
While, the current global financial crisis have started in the failure of the United States which is now affecting the whole world is also very influential but in a very negative way for some other countries. Global financial crisis is mostly equated, or can be treated as economic crisis because the causes and the effects of the said crisis are mainly economic and mostly on the financial stability and the economic state of the country. Economic and financial stabilities can be the changes in prices of commodities, bank failures or unemployment.
Some of the causes which lead to the global financial crisis are the following: (1) high commodity prices, (2) trade, (3) inflation, (4) unemployment, (5) return of volatility, and (6) economic governance. High commodity prices can be mostly seen in the purchase of food and oil. Food is very first in the list because it is the main need of every person. The family should have enough food to eat every day to maintain the health of every person. Food is the number one need of every person in order to live.
Oil follows food in the list since it is the most exported and imported commodity in the world since most nations are not capable of producing oil while other nations are experiencing a surplus of oil. But the price of oil in the world market have reached $147 which led to the increase of oil prices in every country importing oil and the rise in other prime commodities has followed. Inflation is also present due to excess money supply around the world, speculation in commodities, agricultural failure, rise in the cost of imports and the rise in the demand for food and commodities. Unemployment is also considered one of the causes.
The number of graduates or those people looking for jobs is growing largely each year while the number of jobs available does not increase as fast as the number of jobless people. It can be perceived that in the coming year, there will be 20 million people losing their jobs due to the financial crisis. These people who will lose jobs are mostly from the construction, real estate, financial services and auto sectors and industry. Economic governance is also important since it dictates how the economy of the country should be managed not only in time when the economy is stable but also when economic instability becomes unstoppable.
How world leaders and economic advisors handle the situation is very important especially in the US because whatever decision they make will not only be perceived by the nation but also of different and other nations around the world that are mostly dependent on the US economic state. The global financial crisis can result to recession, rise in unemployment rate and liquidity crisis. Just after the 2008 US presidential election, leaders of the United States admitted that the country is in recession. This means that the economy is not stable as well as the financial capability of the country.
This is the worst that can happen to the most influential country in the world since most of the countries in the world are depending on the economic changes that will be happening in the US for economic changes in their countries to also occur. Another worst effect that can be expected if the crisis will not be stopped is the rise in the unemployment rate all over the world. Major companies will be experiencing problems in their balance sheets that may result to the company closing down or laying off a number of workers. The global financial crisis may result in the economy slowing down and jobs will surely be affected.
In what way? Investors might be experiencing emotions in the presence of paper based losses and there will be a visible decline in wealth. The state of the investment can experience a bad state that will choose to either close down or be taken over y competitors. Major companies can also result in selling their shares of stock because of the liquidity crisis. In this moment, banks will not be willing to lend money to other banks to protect the money and assets that their investors and depositors have trusted them. It will be a big risk for banks to lend money to other banks since some banks are already experiencing bankruptcy.
Another thing is that importing and exporting products from other countries will be costly that the exportation and importation rates can be slowed down. In the exporting country, the commodity prices will be experiencing a decline. The exportation process slowing down, there will be lower prices for goods and services. The presence of the major global financial crisis has forced policymakers to focus on the problem well and come up with reforms that will address the problem encountered due to the crisis. Some policymakers had come up with reforming the global financial system in order to address the problem.
World leaders and economic advisors have already conducted meetings regarding the global financial crisis talking about possible steps to address the problem itself and the problems that rooted to from the major crisis. The global financial crisis may have dangerous consequences mainly to the urban and rural poor, the labor sector and women and other marginalized sector of the society. These sectors are the most vulnerable to the changes that will be brought by the crisis so the country must first focus on these sectors. Policies focusing and protecting these sectors must be implemented to avoid involuntary hunger and unemployment rate.
Since these are expected to be the most affected by the crisis, the state should be able to implement policies regarding social protection of these sectors. Companies who are mostly managing and holding these sectors must consider the state of the workers before deciding to lay-off workers. The most possible way is to offer lower salary for the workers if some of them will not agree to being removed from the job. The lower the salary, the greater the possibility for the owners to pay all the workers and there will be no problems regarding formation of unions because of the removal of employees.
The companies just need to talk it over to their employees before making a move because the laborers will be the most affected sector. Investors and depositors are starting to save money on their own than putting them on the banks since there are a number of banks experiencing difficulties in maintaining their balance sheets which can result to bankruptcy. Most of these investors and depositors are afraid to trust the banks to take care of their money due to the fact that when the crisis ill become bigger, they will have no money to spend on their basic needs.
In this way, the state can talk to the central bank in lending money to banks that need most of the supplies of money to adhere to the customers’ needs and wants. Investors and depositors still have the rights to their investments. The state should also allocate budget for basic services. Long term plans are not possible at this very moment of crisis since as time passes by the number of people who might be experiencing difficulties due to the crisis is rising. The state should not focus on what can be done for the future but focus more on what can be done today to address the current issues brought about by the global financial crisis.
Short-term goals are more advised right now since there is a need for a quick recovery for other people especially the ones belonging to the lower-income groups, they are the most affected anyway. Overseas workers have been laid-off because some companies are securing jobs for their own country men. Overseas workers should not just be removed from their work; even though they are not from the country they should be given the same right as every worker in the country has.
Protection of these workers should also be implemented since most of them are taking jobs that the citizens of the country cannot take to get as jobs since most of them see the jobs very low. The global financial crisis might bring something unexpected to the country. As some economists have already perceived the rise in unemployment rate, liquidity crisis and recession might occur. Some may say that this is uncontrollable yet certain measures must be taken to address the problem at the present. Short time goals are the most advised at this moment. s