Financial crisis(金融危机)

1. Introduction引言

在全球金融危机的影响和酝酿下，其影响在2007年中期到2008年才逐渐展现。美国信贷危机的根源是 - 在经济扩张的需求体质下，作为利润堆积起来的一种风险，投资者最终会发现很难找到产生大回报的投资，所以他们高风险的前景后，盲目的“送”钱。对于次级抵押贷款投资来说，体制下根本没有信用检查按揭贷款，首付，甚至连收入证明都不需要。

The global financial crisis, brewing for a while, really started to show its effects in the middle of 2007 and into 2008. The root of the American credit crisis is - as profits pile up during economic expansions, investors eventually find it difficult to find investments that generate large returns, so they send their money after riskier prospects. In the expansion that just ended, the most important of those questionable investments was subprime mortgages, culminating in mortgage loans that required minimal to nonexistent credit checks, down payments or even proof of income.

总共约5500亿的次级贷款（和一个单独的$7250亿的Alt-A级贷款 - 然后品质提升至次贷）在目前来说的评级是优秀的（Stratfore，2008）。但它造成了许多不良影响，比如一些最大和最古老的银行和一些投资公司和保险公司都已经宣布破产或不得不被政府拨款救助。该信贷流动冻结，贷款人的信心下降，世界各国的经济于是乎走向衰落。
In total, some $550 billion of subprime loans (and a separate $725 billion of Alt-A loans — the next quality step up from subprime) are currently outstanding (Stratfore, 2008). It caused many bad effects, such as some of the largest and most venerable banks, investment houses, and insurance companies have either declared bankruptcy or have had to be rescued financially. The credit flows froze, lender confidence dropped, and one after another the economies of countries around the world dipped toward recession. The crisis exposed fundamental weaknesses in financial systems worldwide, and despite coordinated easing of monetary policy by governments and trillions of dollars in intervention by governments and the International Monetary Fund, the crisis continues.

 

Firstly the financial crisis cause around the world stock markets have fallen, for example December 5, 2008, The Associated Press reported that stock purchased by the federal government as part of the bank bailout has lost nearly one‐third of its value in the last month. Under the plan, the government negotiated options to purchase up to 1.3 billion shares of common bank stock that was valued at $27 billion. Now, the value of that common stock is worth about $19 billion (The Mintel report, 2009).

 

Secondly financial crisis cause the unemployed rate was increased quickly, according to the U.S. Department of Labour, jobless claims actually declined by 14,000 for the week ending November 22. However, the four‐week moving average of claims rose to 518,000 from 507,000, which is the highest it has been since early 1983 and the U.S. Labor Department reports that the unemployment rate reached a 15‐year high in November. According to the report, 533,000 jobs were cut in November and the unemployment rate rose from 6.5% to 6.7%. As of November, 10.3 million people were unemployed, an increase of 2.7 million since December 2007. Employment rates declined in almost every industry, with most losses occurring in the professional and business services sectors. In contrast, the health care industry added 34,000 jobs in November 2008 (The Mintel report, 2009), and the high unemployed rate cause the decrease of the consumers spending, the U.S. Department of Commerce is reporting that consumer spending is down. In October, personal consumer spending dropped 1 percent compared to the previous month, the largest decline since September 2001. Orders for durable goods also declined for the third month in a row by a total of 6.2%. Excluding transit‐related durables, orders decreased 4.4%. Orders for commercial airlines were down 4.7 percent, while demand for automobiles decreased by 4.5% (The Mintel report, 2009).

 

Finally many large financial institutions have effect of the financial crisis, they have collapsed or been bought out such as Lehman Brothers Holdings Inc. has filed for bankruptcy. On November 20, 2008, the Wall Street Journal reported that president‐elect Barack Obama has promised an increase in government intervention in the auto, energy and banking industries to support them tied over the financial crisis.

 

Therefore, under the pressure of the slow economic growth and inflation, governments in even the wealthiest nations have had to come up with rescue packages to bail out their financial systems. The US President George W. Bush asked Congress on September 20, 2008 for the authority to spend as much as $700 billion to purchase troubled mortgage assets and contain the financial crisis.

 

There are three main reasons for choosing this topic as the dissertation title showed. Firstly, financial crisis was started from US; basically the US is a superpower. There are lots of 'global giants' over there, which means big money. If they start going down the failing, then people tend to lose confidence in the market and start to put less money in. Eventually things start ending up costing less overall - their value decreases. Many companies in US are international, so this also affects other countries. A number of nations urged the US to provide meaningful assurances and bailout packages for the US economy, as that would have a knock-on effect of reassuring foreign investors and helping ease concerns in other parts of the world. Because Chinese companies have done many businesses with American companies, it will have the big affect by the America financial crisis.

 

Secondly, this crisis has shown that in an increasingly inter-connected world means there are always knock-on effects and as a result, China has had more exposure to problems stemming from the West. In China you have seen its stock markets suffer, currency values going on a downward trend, and high fuel costs, soaring commodity prices together with fears of global recession. And there are high risk of job losses and associated problems such as social unrest. However, the financial crisis is likely to diminish the status of the United States as the world’s only superpower. On the practical level, the US is already stretched militarily, in Afghanistan and Iraq, and is now stretched financially (Global Issue, 2009). This is a very significant timing because China has often been treated as second-class citizens when it comes to international trade, finance and investment talks. This time, China is potentially trying to flex their muscle, maybe because they see an opportunity in this crisis, which at the moment mostly affects the rich West.

 

Thirdly, a global financial meltdown will affect the livelihoods of almost everyone in an increasingly inter-connected world. People have to facing the high rate of unemployed, high fuel costs and soaring commodity prices. But the problem could have been avoided, if the goverment supporting the current economics models weren’t so vocal, influential and inconsiderate of others’ viewpoints and concerns.

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2 Aims and objectives宗旨和目标
 

The aims and objectives of this dissertation are to:

Understand the current financial crisis

What is the main cause of the financial crisis and what is the feature of the financial crisis

Find out the effect of the financial crisis in developed countries

How it effect the developed country, such as EU, US

Focus on the contagion effect of the current financial crisis

How it contagion effect on China

How the government take measures to settle the financial crisis

 

The research questions that I will try to answer in this thesis are:

The main features of current crisis? How did it manifest itself?

Is there a contagion affect of current crisis? How has the current crisis affected China?

What are the transmission mechanisms in the contagion affect?

To analysis the role of the government in the financial crisis?

 

3 Methodology方法论
 

Secondary sources

Secondary sources as materials produced sometime after an event happened, they contain information that has been interpreted, commented, analyzed or processed in such a way that it no longer conveys the freshness of the original.  History textbooks, dictionaries, encyclopaedias, interpretive journal articles, and book reviews are all examples of secondary sources (Reference Department, 2002). A large number of literature have been review on, they include wide range of content, such as the essence of crisis financial, how did financial crisis manifest itself and theories of contagion of financial crisis. A study about the effect of the financial crisis in America it requires more quality of feedbacks, understanding of key literatures to find the bridge between the varied perspectives and present research results on this topic. It will enable us to get an understanding of the feature of financial crisis and the theories of the contagion.

 

Data analysis is a process of gathering, modelling and transforming data with the goal of highlighting useful information, suggesting conclusions, and supporting decision making. Using the data analysis to demonstrate the effect of current financial crisis in EU,US and the contagion affects to the China.