Compare By Investment Type
Compare By Investor Type
Top Online Brokerage
Compare By Special Offers
Popular Industry News Analysis
Most Popular Offers
Investor Education
1 Browse
Browse Through various online brokerage firms
2Compare
Compare StockBrokers to find best Broker to Buy Stocks
3 Apply
Open a Trading Account through Secure Online application
 

 

Economics 101 : 2008-09 Financial crises Roots , why was it not stopped and future
By Geetali Sharma
 
 
Many people over the years have said that economics can never be a perfect science. Economist like Keynesian has said that the best economy is one where there is no interference and things balance out themselves. But if keep following Keynesian economics than there would also be periods of severe depressions and high unemployment. So should governments step whenever there is a recession and try and avoid it. Did Bush government not do enough the current financial crises?
 
The answer is although Keynesian economics is not the ideal solution from people perspective it is pretty much accurate. The root of the current financial crises lay down in the 2001 recession. The 2001 recession was one of the shortest and most well controlled recessions ever. Then Fed Chairman Alan Greenspan reduced the interest rates to zero percent . This enabled the banks to take on more risk and hence give more loans. This had two impacts : The good part was that small business started growing at very fast rate. However the bad part was people who were not supposed to be getting loans started getting loans and credit standard fell way lower.  
 
The other perspective is that the root of crises was the greed that is grown by Keynesian economics of totally free economy. They said the de-regulation regime followed by Bush Administration was responsible for the greed of Wall Street which was the root of financial crises. My perspective has been it was too much interference by Fed that led to the crises. Not only had they reduced the interest rates during the crisis but kept it low for a very long time after that. This over heated the economy and had wrong impacts. In a true Keynesian economy those rates should have been raised immediately, however government interference prevented it.
 

My belief is that government did all it could to prevent the crises, however that was the source of the problem. Their continued efforts to interfere like in Lehman’s case prevented a deep but small recession and led to much longer recession with far reaching consequences. The current government under President Obama is worsening the situation. Although it feels like we are out of the recession. What government has done is increased US debt levels to unbearable levels. We can hope for the best but this has led to real possibility of deflation occurring in the economy.  My bet is government cannot afford a deflation or even a double dip recession so they will keep printing money. Hence gold might turn into the best investment. Look at GLD if you are looking at a safe investment haven.

 
Zecco
FREE Stock Trades every month
Lightspeed
Get $10,000 CASH BACK
Tradeking
Receive up to $150 in transfer fees when you switch to TradeKing
Options Xpress
One Account, Maximum Control
Scottrade
Exceptional Online Stock Broker with local branch offices
scottrade
Etrade
100 commision free stock and option trades
OptionsHouse
Spend Less and Get More at OptionsHouse! $2.95 Flat-Rate Stock Trades
Firstrade
Five commission-free trades
 
Mbtrading
Active trader platform
Marsco
No share limits
TD Ameritrade
Trade comission free for 30 days + $100



Leave a Comment